Execution Version
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement is entered into and dated as of June 8,
2004 (this "AGREEMENT"), by and among Visual Data Corporation, a Florida
corporation (the "COMPANY"), and each of the purchasers identified on the
signature pages hereto (each, a "PURCHASER" and collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933 (the "SECURITIES
ACT"), and Rule 506 promulgated thereunder, the Company desires to issue and
sell to each Purchaser, and each Purchaser, severally and not jointly, desires
to purchase from the Company, certain securities of the Company pursuant to the
terms set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser,
severally and not jointly, agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the meanings set forth in this Section
1.1:
"ADDITIONAL INVESTMENT RIGHTS" means, collectively, the Additional
Investment Rights issued and sold under this Agreement, in the form of Exhibit
A.
"ADDITIONAL INVESTMENT RIGHT WARRANTS" has the meaning set forth in
the Additional Investment Rights.
"ADDITIONAL NOTES" means the 8.0% Senior Secured Convertible Notes
due on the 4th anniversary of the issuance date thereof with an aggregate
principal face amount equal to 50% of the aggregate principal amount of the
Initial Notes in the form of Exhibit B hereto issuable to the Purchasers upon
exercise of the Additional Investment Rights.
"AFFILIATE" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 144
under the Securities Act. With respect to a Purchaser, any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company or any Subsidiary commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
relating to the Company or any Subsidiary thereof; (b) there is commenced
against the Company or any Subsidiary any such case or proceeding that is not
dismissed within 60 days after commencement; (c) the Company or any Subsidiary
is adjudicated insolvent or bankrupt or any order of relief or other order
approving any such case or proceeding is entered; (d) the Company or any
Subsidiary suffers any appointment of any custodian or the like for it or any
substantial part of its property that is not discharged or stayed within 60
days; (e) the Company or any Subsidiary makes a general assignment for the
benefit of creditors; (f) the Company or any Subsidiary fails to pay, or states
that it is unable to pay or is unable to pay, its debts generally as they become
due; (g) the Company or any Subsidiary calls a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its debts; or
(h) the Company or any Subsidiary, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of the
foregoing.
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking institutions in
the State of New York and/or the State of Florida are authorized or required by
law or other governmental action to close.
"CHANGE OF CONTROL" means the occurrence of any of the following in
one or a series of related transactions: (i) an acquisition after the date
hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) under the Exchange Act) of more than one-third of the voting rights
or equity interests in the Company; (ii) a replacement of more than one-half of
the members of the Company's board of directors that is not approved by those
individuals who are members of the board of directors on the date hereof (or
other directors previously approved by such individuals); (iii) a merger or
consolidation of the Company or any Subsidiary or a sale of more than one-third
of the assets of the Company in one or a series of related transactions, unless
following such transaction or series of transactions, the holders of the
Company's securities prior to the first such transaction continue to hold at
least two-thirds of the voting rights and equity interests in of the surviving
entity or acquirer of such assets; (iv) a recapitalization, reorganization or
other transaction involving the Company or any Subsidiary that constitutes or
results in a transfer of more than one-third of the voting rights or equity
interests in the Company; (v) consummation of a "Rule 13e-3 transaction" as
defined in Rule 13e-3 under the Exchange Act with respect to the Company, or
(vi) the execution by the Company or its controlling shareholders of an
agreement providing for or reasonably likely to result in any of the foregoing
events. Notwithstanding the foregoing, the transactions contemplated by this
Agreement, the Series A-10 Preferred Stock Offering and the Company's proposed
merger transaction with Onstream Media, Inc., shall not constitute a Change of
Control.
"CLOSING" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
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"CLOSING DATE" means the date of the Closing.
"CLOSING PRICE" means, for any date, the price determined by the
first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on an Eligible Market or any other national securities
exchange, the closing bid price per share of the Common Stock for such date (or
the nearest preceding date) on the primary Eligible Market or exchange on which
the Common Stock is then listed or quoted; (b) if prices for the Common Stock
are then quoted on the OTC Bulletin Board, the closing bid price per share of
the Common Stock for such date (or the nearest preceding date) so quoted; (c) if
prices for the Common Stock are then reported in the "Pink Sheets" published by
the National Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by a majority in interest of the Purchasers.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, no par value
per share, and any securities into which such common stock may hereafter be
reclassified.
"COMMON STOCK EQUIVALENTS" means, collectively, Options and
Convertible Securities.
"COMPANY COUNSEL" means Xxxxxx & Xxxx, counsel to the Company.
"CONVERSION PRICE" means $2.00 per share.
"CONVERTIBLE SECURITIES" means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common Stock.
"EFFECTIVE DATE" means the date that the Registration Statement is
first declared effective by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or the Nasdaq Small Cap
Market.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means the 30th day following the Closing Date with
respect to the initial Registration Statement required to be filed hereunder,
and, with respect to any additional Registration Statements that may be required
pursuant to Section 6.1(f), the 15th day following the date on which the Company
first knows, or reasonably should have known, that such additional Registration
Statement is required under such Section.
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"INITIAL NOTES" means the 8.0% Senior Secured Convertible Notes due
on the 4th anniversary of the Closing Date with an aggregate principal face
amount of $6,500,000 issued by the Company to the Purchasers hereunder in the
form of Exhibit B hereto.
"INITIAL WARRANTS" means the Common Stock purchase warrants in the
form of Exhibit D.
"LOSSES" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of preparation
of legal action and reasonable attorneys' fees.
"NOTES" means the Initial Notes and the Additional Notes.
"OPTIONS" means any rights, warrants or options to subscribe,
directly or indirectly for or purchase Common Stock or Convertible Securities
(including all Additional Notes and Additional Investment Right Warrants that
can be issued under the Transaction Documents).
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"PLEDGE AGREEMENT" means the Pledge Agreement dated as of the
Closing Date, among the Company and the Purchasers substantially in the form of
Exhibit G.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus including post effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"PURCHASER COUNSEL" means Proskauer Rose LLP, counsel to Vertical
Ventures, LLC.
"REGISTRABLE SECURITIES" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction Documents,
together with any securities issued or issuable upon any stock split, dividend
or other distribution, recapitalization or similar event with respect to the
foregoing.
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"REGISTRATION STATEMENT" means the initial registration statement
required to be filed under Article VI and any additional registration statements
contemplated by Section 6.1(f), including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
"REQUIRED EFFECTIVENESS DATE" means (i) with respect to the initial
Registration Statement required to be filed hereunder, the 90th day following
the Closing Date or in the event the Registration Statement shall be reviewed by
the Commission, the 120th day following the Closing Date, and (ii) with respect
to any additional Registration Statements that may be required pursuant to
Section 6.1(f), the 45th day following the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required under such Section.
"RULE 144," "RULE 415," and "RULE 424" means Rule 144, Rule 415 and
Rule 424, respectively, promulgated by the Commission pursuant to the Securities
Act, as such Rules may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
"SECURITIES" means the Notes, the Warrants, the Additional
Investment Rights and the Underlying Shares issued or issuable (as applicable)
to the applicable Purchaser pursuant to the Transaction Documents.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENT" means the Security Agreement dated as of the
Closing Date, among the Company and the Purchasers substantially in the form of
Exhibit H.
"STOCKHOLDER APPROVAL CONDITION" means the Company shall have
obtained the Stockholder Approval on or before the date that is the 90th day
following the date of this Agreement or in the event the proxy materials shall
be reviewed by the Commission, the 120th day following the date of this
Agreement.
"SUBSIDIARY" means any subsidiary of the Company that is required to
be listed in Schedule 3.1(a).
"TRADING DAY" means (a) any day on which the Common Stock is listed
or quoted and traded on its primary Trading Market, or (b) if the Common Stock
is not then listed or quoted and traded on any Trading Market, then any Business
Day.
"TRADING MARKET" means Nasdaq Small Cap Market or any other national
securities exchange, market or trading or quotation facility on which the Common
Stock is then listed or quoted.
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"TRANSACTION DOCUMENTS" means this Agreement, the Additional
Investment Rights, the Notes, the Warrants, the Security Agreement, the Pledge
Agreement, the Transfer Agent Instructions and any other documents or agreements
executed or delivered in connection with the transactions contemplated hereby.
"TRANSFER AGENT INSTRUCTIONS" means the Company's transfer agent
instructions in the form of Exhibit C.
"UNDERLYING SHARES" means the shares of Common Stock issuable (i)
upon conversion of the Initial Notes, (ii) upon exercise of the Warrants, (iii)
upon conversion of the Additional Notes issued upon exercise of the Additional
Investment Rights, (iv) upon exercise of the Additional Investment Right
Warrants issued upon exercise of the Additional Investment Rights, and (v) in
satisfaction of any other obligation of the Company to issue shares of Common
Stock pursuant to the Transaction Documents, and in each case, any securities
issued or issuable in exchange for or in respect of such securities.
"VWAP" means on any particular Trading Day or for any particular
period the volume weighted average trading price per share of Common Stock on
such date or for such period on an Eligible Market as reported by Bloomberg
L.P., or any successor performing similar functions; provided, however, that
during any period the VWAP is being determined, the VWAP shall be subject to
adjustment from time to time for stock splits, stock divider, combinations and
capital reorganized as applicable.
"WARRANTS" means the Initial Warrants and the Additional Investment
Right Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing, the Company shall issue and sell to the Purchasers,
and the Purchasers shall, severally and not jointly, purchase from the Company,
the Initial Notes, the Initial Warrants and the Additional Investment Rights for
an aggregate purchase price of up to $6,500,000. The Closing shall take place at
the offices of Purchaser Counsel or at such other location or time as the
parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) an Initial Note, registered in the name of such Purchaser,
in the principal amount indicated below such Purchaser's name on the signature
page of this Agreement under the heading "Initial Note Principal Amount";
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(ii) an Additional Investment Right, registered in the name of
such Purchaser, pursuant to which such Purchaser shall have the right to acquire
such principal amount of Additional Notes and Additional Investment Right
Warrants indicated below such Purchaser's name on the signature page of this
Agreement under the headings "Additional Investment Rights - Additional Notes"
and "Additional Investment Rights - Warrant Shares", respectively, on the terms
set forth therein;
(iii) a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire such number of
Underlying Shares indicated below such Purchaser's name on the signature page of
this Agreement under the heading "Warrant Shares".
(iv) the legal opinion of Company Counsel, in the form of
Exhibit E, executed by such counsel and delivered to the Purchasers;
(v) the Transfer Agent Instructions duly executed by the
Company and acknowledged by the Company's transfer agent;
(vi) the Security Agreement executed by the Company;
(vii) the Pledge Agreement executed by the Company;
(viii) a certificate from a duly authorized officer certifying
on behalf of the Company that each of the conditions set forth in Section 5.1
has been satisfied; and
(ix) any other document reasonably requested by the Purchasers
or Purchaser Counsel.
(b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) the purchase price indicated below such Purchaser's name
on the signature page of this Agreement, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose;
(ii) the Security Agreement duly executed by such Purchaser;
and
(iii) the Pledge Agreement duly executed by such Purchase.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers:
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(a) SUBSIDIARIES. The Company does not directly or indirectly
control or own any interest in any other corporation, partnership, joint venture
or other business association or entity (a "SUBSIDIARY"), other than those
listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company
owns, directly or indirectly, all of the capital stock of each Subsidiary free
and clear of any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction (collectively, "LIENS"), and all the issued
and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights.
(b) ORGANIZATION AND QUALIFICATION. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (i)
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in a material adverse effect on the results of
operations, assets, prospects, business or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) materially adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereunder and thereunder have been duly authorized by
all necessary action on the part of the Company and no further consent or action
is required by the Company, its Board of Directors or its stockholders other
than the Stockholder Approval set forth in Section 4.17 and on Schedule 3.1(d).
Each Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its certificate or articles of
incorporation or by-laws.
(d) 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 do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation or bylaws, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any material agreement, credit facility, debt or other material instrument
(evidencing a Company or Subsidiary debt or otherwise) to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except as do not, individually or in the aggregate, have or are reasonably be
expected to result in a Material Adverse Effect and as set forth in Schedule
3.1(d).
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(e) FILINGS, CONSENTS AND APPROVALS. Except as set forth on Schedule
3.1(d), the Company is not required to obtain any consent, waiver, authorization
or order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company
of the Transaction Documents, other than the filing with the Commission of the
Registration Statement, the application(s) to each Trading Market for the
listing of the Underlying Shares for trading thereon in the time and manner
required thereby, and applicable Blue Sky filings (collectively, the "Required
Approvals").
(f) ISSUANCE OF THE SECURITIES. The Securities have been duly
authorized. The Initial Notes, the Initial Warrants and the Additional
Investment Rights have been, and the Additional Notes and Additional Investment
Right Warrants issuable upon exercise of the Additional Investment Rights, when
issued in accordance with the terms of the Additional Investment Rights, and the
Underlying Shares or other securities issuable upon conversion of the Notes and
upon exercise of the Warrants, when so issued in accordance with the terms of
the Notes or the Warrants, as the case may be, will be, validly issued. The
Initial Notes, the Initial Warrants and Additional Investment Rights are, and
the Additional Notes, Additional Investment Right Warrants, Underlying Shares or
other securities issuable upon conversion of the Notes, Warrants or Additional
Investment Rights, when so issued in accordance with the terms of the Notes,
Warrants or Additional Investment Rights, as the case may be, will be, fully
paid and nonassessable and free of preemptive or similar rights. The Initial
Notes, the Initial Warrants and the Additional Investment Rights have been, the
Additional Notes and the Additional Investment Right Warrants shall be, and the
Underlying Shares or other securities issuable upon conversion of the Notes and
upon exercise of the Warrants, when so issued in accordance with the terms of
the Notes or the Warrants, as the case may be, will be, issued in compliance
with applicable securities laws, rules and regulations. The Company has reserved
from its duly authorized capital stock the maximum number of shares of Common
Stock to be issued to the applicable Purchasers upon conversion or exercise of
the Notes, Warrants, Additional Investment Rights or issuable pursuant to the
other Transaction Documents.
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(g) CAPITALIZATION. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company is set forth in Schedule
3.1(g). No securities of the Company are entitled to preemptive or similar
rights, and no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and except as disclosed in Schedule 3.1(g) or the SEC
Reports (as defined below), there are no outstanding options, warrants, rights
to subscribe to or calls or commitments of any character relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. The issue and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (the foregoing materials being collectively referred
to herein as the "SEC REPORTS" and, together with the Schedules to this
Agreement, the "DISCLOSURE MATERIALS") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to the Purchasers a
copy of all SEC Reports filed within the 10 days preceding the date hereof. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, 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 financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for 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, immaterial, year-end audit adjustments.
(i) MATERIAL CHANGES. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans. The Company
does not have pending before the Commission any request for confidential
treatment of information.
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(j) LITIGATION. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "ACTION") which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) LABOR RELATIONS. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(l) COMPLIANCE. Except as noted in Schedule 3.1(l), neither the
Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other material agreement or material instrument to which it is
a party or by which it or any of its properties is bound (whether or not such
default or violation has been waived), (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is or has been in violation of
any statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as does not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
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(m) REGULATORY PERMITS. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities reasonably necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither
the Company nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
(n) TITLE TO ASSETS. The Company owns no real property. The Company
and the Subsidiaries have good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do
not materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiaries. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in material
compliance.
(o) PATENTS AND TRADEMARKS. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.
(p) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. The Company has no reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant increase in cost.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set forth
in SEC Reports, none of the executive officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (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 entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
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(r) INTERNAL ACCOUNTING CONTROLS. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient 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
GAAP 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.
(s) SOLVENCY. Based on the financial condition of the Company as of
the Closing Date, after giving pro forma effect to the consummation of the
transactions contemplated hereby, (i) 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) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) 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. 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).
(t) CERTAIN FEES. Except as described in Schedule 3.1(t), no
brokerage or finder's fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(u) PRIVATE PLACEMENT. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2(b)-(e), no registration
under the Securities Act is required for the offer and sale of the Securities by
the Company to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and regulations of the
Trading Market and no shareholder approval is required for the Company to
fulfill its obligations under the Transaction Documents.
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(v) FORM S-3 ELIGIBILITY. The Company is eligible to register the
resale of its Common Stock for resale by the Purchasers under Form S-3
promulgated under the Securities Act.
(w) LISTING AND MAINTENANCE REQUIREMENTS. Except as set forth on
Schedule 3.1(w), the Company has not, in the two years preceding the date
hereof, received notice (written or oral) from any Eligible Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Eligible
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
(x) REGISTRATION RIGHTS. Except as described in Schedule 3.1(x), the
Company has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.
(y) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company's issuance of
the Securities and the Purchasers' ownership of the Securities.
(z) DISCLOSURE. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that constitutes or might constitute material,
non-public information other than information regarding the transactions
contemplated by the Transaction Documents. The Company understands and confirms
that the Purchasers will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
(aa) NO VIOLATION. Upon receipt by the Company of Stockholder
Approval, the issuance and sale of the Securities contemplated hereby does not
conflict with or violate any rules or regulations of the Trading Market.
(bb) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF SECURITIES.
The Company acknowledges and agrees that each of the Purchasers is acting solely
in the capacity of an arm's length purchaser with respect to this Agreement and
the transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company or any
other Purchaser (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any Purchaser or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Purchaser's purchase of the Securities. The Company further represents to each
Purchaser that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives. The Company further acknowledges that no Purchaser has made any
promises or commitments other than as set forth in this Agreement, including any
promises or commitments for any additional investment by any such Purchaser in
the Company.
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(cc) INVESTMENT COMPANY. The Company is not, and is not an Affiliate
of, an investment company within the meaning of the Investment Company Act of
1940, as amended.
(dd) SENIORITY. Except as set forth on Schedule 3.1(dd) and as
provided in Section 4.10(c), as of the date of this Agreement, no indebtedness
of the Company is senior to the Notes in right of payment, whether with respect
to interest or upon liquidation or dissolution, or otherwise.
(ee) XXXXXXXX-XXXXX ACT. The Company is in compliance with
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 and applicable rules
and regulations promulgated by the Commission thereunder in effect as of the
date of this Agreement, except where such noncompliance could not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and warrants to
the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate, limited liability
company or partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of this Agreement have been duly authorized by all
necessary corporate or limited liability company action on the part of such
Purchaser. This Agreement has been duly executed by such Purchaser and, when
delivered by such Purchaser in accordance with terms hereof, will constitutes
the valid and legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities
for investment purposes and not with a view to or for distributing such
Securities or any part thereof, without prejudice, however, to such Purchaser's
right at all times to sell or otherwise dispose of all or any part of such
Securities in compliance with applicable federal and state securities laws.
Nothing contained herein shall be deemed a representation or warranty by such
Purchaser to hold Securities for any period of time.
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(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises the Additional Investment Right it will be, an "accredited investor"
as defined in Rule 501(a) under the Securities Act. Such Purchaser is not a
registered broker-dealer under Section 15 of the Exchange Act.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(e) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
The Company acknowledges and agrees that each Purchaser does not make and
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its transfer agent, without any
such legal opinion, any transfer of Securities by a Purchaser to an Affiliate of
such Purchaser, provided that the transferee certifies to the Company that it is
an "accredited investor" as defined in Rule 501(a) under the Securities Act. As
a condition of transfer, any such transferee shall agree in writing to be bound
by the terms of this Agreement and shall have the rights of a Purchaser under
this Agreement.
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(b) The Purchasers agree to the imprinting, except as otherwise
permitted by Section 4.1(c), the following legend on any certificate evidencing
Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR
BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY SUCH SECURITIES.
(c) Certificates evidencing Securities shall not be required to
contain the legend set forth in Section 4.1(b) or any other legend (i) while a
Registration Statement covering the resale of such Securities is effective under
the Securities Act, or (ii) following any sale of such Securities pursuant to
Rule 144, or (iii) if such Securities are eligible for sale under Rule 144(k),
or (iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission). The Company shall use its reasonable best efforts
to cause its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Company's transfer agent on the Effective Date. Following
the Effective Date or at such earlier time as a legend is no longer required for
certain Securities and provided that the Purchaser agrees to comply with all
applicable securities laws in connection with the transfer of the Securities,
the Company will no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a legended
certificate representing such Securities, deliver or cause to be delivered to
such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in Section 4.1(b). For so long as any
Purchaser owns Securities, the Company will not effect or publicly announce its
intention to effect any exchange, recapitalization or other transaction that
effectively requires or rewards physical delivery of certificates evidencing the
Common Stock.
(d) The Company acknowledges and agrees that a Purchaser may from
time to time pledge or grant a security interest in some or all of the
Securities in connection with a bona fide margin agreement or other loan or
financing arrangement secured by the Securities and, if required under the terms
of such agreement, loan or arrangement, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties. Such a pledge or transfer
would not be subject to approval of the Company and no legal opinion of the
pledgee, secured party or pledgor shall be required in connection therewith.
Further, no notice shall be required of such pledge. At the appropriate
Purchaser's expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities, including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the Securities
Act to appropriately amend the list of selling stockholders thereunder.
17
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities (including the Underlying Shares) will result in dilution of
the outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including without limitation its obligation to
issue the Securities (including the Underlying Shares) pursuant to the
Transaction Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction, regardless of the effect of
any such dilution or any claim that the Company may have against any Purchaser.
4.3 Furnishing of Information. As long as any Purchaser owns Securities,
the Company shall use its reasonable best efforts to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. Upon the request of any Purchaser, the Company shall deliver
to such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with paragraph (c) of Rule 144 such information as is required for
the Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request to satisfy the provisions of Rule 144 applicable to the
issuer of securities relating to transactions for the sale of securities
pursuant to Rule 144.
4.4 Integration. The Company shall use its best efforts to ensure that it
shall not sell, offer for sale or solicit offers to buy or otherwise negotiate
in respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Securities Act of the sale of the
Securities to the Purchasers.
4.5 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents in
such amount as may be required to fulfill its obligations in full under the
Transaction Documents.
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(b) The Company shall (i) in the time and manner required by each
Trading Market, prepare and file with such Trading Market an additional shares
listing application covering all of the shares of Common Stock issued or
issuable under the Transaction Documents, (ii) take all steps necessary to cause
such shares of Common Stock to be approved for listing on each Trading Market as
soon as possible thereafter, (iii) provide to the Purchasers evidence of such
listing, and (iv) use its reasonable best efforts to maintain the listing of
such Common Stock on each such Trading Market or another Eligible Market.
(c) In the case of a breach by the Company of Section 4.5(a), in
addition to the other remedies available to the Purchasers, the Purchasers shall
have the right to require the Company to: (i) use its best efforts to obtain the
required shareholder approval necessary to permit the issuance of such shares of
Common Stock as soon as is possible, but in any event not later than the 60th
day after such notice, and (ii) if after such 60 days the Company fails to
obtain the required shareholder approval on or prior to the 60th day after such
notice, then within three (3) Trading Days after such both day, the Company
shall pay cash to such Purchaser, as liquidated damages and not as a penalty, in
an amount equal to the number of shares of Common Stock not issuable by the
Company times 115% of the average Closing Price over the five Trading Days
immediately prior to the date of such notice or, if greater, the five Trading
Days immediately prior to the date of payment (the "CASH AMOUNT").
4.6 Subsequent Placements.
(a) From the date hereof until the Effective Date, the Company will
not, directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or the Subsidiaries' equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable or exercisable for
Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "SUBSEQUENT PLACEMENT").
(b) From the Effective Date until 30 Trading Days after the
Effective Date (the "BLOCKOUT PERIOD"), the Company will not, directly or
indirectly, effect any Subsequent Placement except as set forth in Section
4.6(e).
(c) The Blockout Period set forth in Section 4.6(b) above shall be
extended for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, (ii) the Registration
Statement is not effective, or (iii) the prospectus included in the Registration
Statement may not be used by the Purchasers for the resale of Registrable
Securities thereunder.
(d) From the end of the Blockout Period until the one year
anniversary thereof, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with this
Section 4.6(d).
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(i) The Company shall deliver to each Purchaser a written notice
(the "OFFER") of any proposed or intended issuance or sale or exchange of
the securities being offered (the "OFFERED SECURITIES") in a Subsequent
Placement, which Offer shall (w) identify and describe the Offered
Securities, (x) describe the price and other terms upon which they are to
be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the Persons or
entities to which or with which the Offered Securities are to be offered,
issued, sold or exchanged and (z) offer to issue and sell to or exchange
with each Purchaser (A) a pro rata portion of the Offered Securities based
on such Purchaser's pro rata portion of the aggregate principal amount of
the Notes purchased hereunder (the "BASIC AMOUNT"), and (B) with respect
to each Purchaser that elects to purchase its Basic Amount, any additional
portion of the Offered Securities attributable to the Basic Amounts of
other Purchasers as such Purchaser shall indicate it will purchase or
acquire should the other Purchasers subscribe for less than their Basic
Amounts (the "UNDERSUBSCRIPTION AMOUNT").
(ii) To accept an Offer, in whole or in part, a Purchaser must
deliver a written notice to the Company prior to the end of the 10 Trading
Day period of the Offer, setting forth the portion of the Purchaser's
Basic Amount that such Purchaser elects to purchase and, if such Purchaser
shall elect to purchase all of its Basic Amount, the Undersubscription
Amount, if any, that such Purchaser elects to purchase (in either case,
the "NOTICE OF ACCEPTANCE"). If the Basic Amounts subscribed for by all
Purchasers are less than the total of all of the Basic Amounts, then each
Purchaser who has set forth an Undersubcription Amount in its Notice of
Acceptance shall be entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed for;
provided, however, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all the Basic Amounts and the
Basic Amounts subscribed for (the "AVAILABLE UNDERSUBSCRIPTION AMOUNT"),
each Purchaser who has subscribed for any Undersubscription Amount shall
be entitled to purchase on that portion of the Available Undersubscription
Amount as the Basic Amount of such Purchaser bears to the total Basic
Amounts of all Purchasers that have subscribed for Undersubscription
Amounts, subject to rounding by the Board of Directors to the extent its
deems reasonably necessary.
(iii) The Company shall have five (5) Trading Days from the
expiration of the period set forth in Section 4.6(d)(ii) above to issue,
sell or exchange all or any part of such Offered Securities as to which a
Notice of Acceptance has not been given by the Purchasers (the "REFUSED
SECURITIES"), but only to the offerees described in the Offer and only
upon terms and conditions (including, without limitation, unit prices and
interest rates) that are not more favorable to the acquiring Person or
Persons or less favorable to the Company than those set forth in the
Offer.
(iv) In the event the Company shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 4.6(d)(iii) above), then each Purchaser may, at its
sole option and in its sole discretion, reduce the number or amount of the
Offered Securities specified in its Notice of Acceptance to an amount that
shall be not less than the number or amount of the Offered Securities that
the Purchaser elected to purchase pursuant to Section 4.6(d)(ii) above
multiplied by a fraction, (i) the numerator of which shall be the number
or amount of Offered Securities the Company actually proposes to issue,
sell or exchange (including Offered Securities to be issued or sold to
Purchasers pursuant to Section 4.6(c)(ii) above prior to such reduction)
and (ii) the denominator of which shall be the original amount of the
Offered Securities. In the event that any Purchaser so elects to reduce
the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Purchasers in accordance with
Section 4.6(d)(i) above.
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(v) Upon the closing of the issuance, sale or exchange of all or
less than all of the Refused Securities, the Purchasers shall acquire from
the Company, and the Company shall issue to the Purchasers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4.6(d)(iv) above if the Purchasers have so
elected, upon the terms and conditions specified in the Offer. The
purchase by the Purchasers of any Offered Securities is subject in all
cases to the preparation, execution and delivery by the Company and the
Purchasers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Purchasers and their
respective counsel.
(vi) Any Offered Securities not acquired by the Purchasers or other
persons in accordance with Section 4.6(d)(iii) above may not be issued,
sold or exchanged until they are again offered to the Purchasers under the
procedures specified in this Agreement.
(e) The restrictions contained in paragraphs (b) and (d) of this
Section 4.6 shall not apply to (A) any issuance of Common Stock or grant of
Options to employees, officers, directors of or consultants or advisors to the
Company, in each case, pursuant to a stock-based plan, contractual or other
arrangements duly approved by the Company's board of directors; (B) upon
exercise, conversion or exchange of any Common Stock Equivalents described in
Schedule 3.1(g) (provided that such exercise or conversion occurs in accordance
with the terms thereof, without amendment or modification); or (C) the issuance
of securities in connection with a joint venture or development agreement or
strategic partnership or similar agreement approved by the Company's board of
directors, a primary purpose of which is not to raise equity capital.
4.7 Conversion and Exercise Procedures. The form of Exercise Notice
included in the Additional Investment Rights, Warrants and Additional Investment
Right Warrants and the form of Holder Conversion Notice included in the Notes
set forth the totality of the procedures required by the Purchasers in order to
exercise the Additional Investment Rights, Warrants or Additional Investment
Right Warrants or convert the Notes. Except as a result of a change in law, no
additional legal opinion or other information or instructions shall be necessary
to enable the Purchasers to exercise their Additional Investment Rights or
convert their Notes. The Company shall honor exercises of the Additional
Investment Rights, Warrants and Additional Investment Right Warrants and
conversions of the Notes and shall deliver Underlying Shares in accordance with
the terms, conditions and time periods set forth in the Transaction Documents.
21
4.8 Securities Laws Disclosure; Publicity. On or before 8:30 a.m., New
York time, on June 9, 2004, the Company shall issue a press release acceptable
to the Purchasers disclosing all material terms of the transactions contemplated
hereby. Within three Business Day of the date of this Agreement, the Company
shall file a Current Report on Form 8-K with the Commission (the "8-K FILING")
describing the terms of the transactions contemplated by the Transaction
Documents and including as exhibits to such Current Report on Form 8-K this
Agreement and the form of Notes and Additional Investment Rights, in the form
required by the Exchange Act. Thereafter, the Company shall use its reasonable
best efforts to timely file any filings and notices required by the Commission
or applicable law with respect to the transactions contemplated hereby and
provide copies thereof to the Purchasers promptly after filing. The Company
shall, at least two Trading Days prior to the filing or dissemination of any
disclosure required by this paragraph, provide a copy thereof to the Purchasers
for their review. The Company and the Purchasers shall consult with each other
in issuing any press releases or otherwise making public statements or filings
and other communications with the Commission or any regulatory agency or Trading
Market with respect to the transactions contemplated hereby, and neither party
shall issue any such press release or otherwise make any such public statement,
filing or other communication without the prior consent of the other, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement,
filing or other communication. Notwithstanding the foregoing, the Company shall
not publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure
provided the Purchaser shall make available to the Company the beneficial owners
of the Securities. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents not to, provide any Purchaser with any material nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing of
the 8-K Filing without the express written consent of such Purchaser. In the
event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Purchaser shall have the right to require the Company
to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material nonpublic information. No Purchaser
shall have any liability to the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees, shareholders or agents for any
such disclosure. Subject to the foregoing, neither the Company nor any Purchaser
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, that the Company shall
be entitled, without the prior approval of any Purchaser, to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and (ii) as is required by applicable
law and regulations. Each press release disseminated during the 12 months prior
to the Closing Date did not at the time of release contain any untrue statement
of a material fact or omit 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.
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4.9 Use of Proceeds. Except as set forth on Schedule 4.9, the Company
shall use the net proceeds from the sale of the Securities hereunder for working
capital purposes and not for the satisfaction of any portion of the Company's
debt (other than payment of trade payables and accrued expenses in the ordinary
course of the Company's business and prior practices), to redeem any Company
equity or equity-equivalent securities or to settle any outstanding litigation.
4.10 Indebtedness.
(a) At any time after the date of this Agreement, neither the
Company nor any Subsidiary of the Company shall incur any indebtedness,
liability or obligation that is senior to the Notes or pari passu with the Notes
in right of payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise; provided, however, that notwithstanding the
foregoing, the Company may, in the ordinary course of business, incur
indebtedness senior to the Notes in an amount not to exceed $1,500,000.
(b) The provisions of this Section 4.10 shall terminate and be of no
further force or effect upon the conversion or indefeasible repayment in full of
the Notes and all accrued interest thereon and any and all expenses or
liabilities relating thereto.
4.11 Repayment of Notes. Each of the parties hereto agrees that all
repayments of the Notes (including any accrued interest thereon) by the Company
(other than by conversion of the Notes) will be paid pro rata to the holders
thereof based upon the principal amount then outstanding to each of such
parties.
4.12 No Impairment. At all times after the date hereof, the Company will
not take or permit any action, or cause or permit any Subsidiary to take or
permit any action that materially impairs or adversely affects the rights of the
Purchasers under the Agreement or the Notes.
4.13 Fundamental Changes. Except as set forth on Schedule 4.13(b), in
addition to any other rights provided by law or set forth herein, from and after
the date of this Agreement and for so long as any Notes remain outstanding, the
Company shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of a majority of the outstanding
principal face amount of the Notes:
(a) purchase, redeem (other than pursuant to equity incentive
agreements with non-officer employees giving the Company the right to repurchase
shares upon the termination of services) or set aside any sums for the purchase
or redemption of, or declare or pay any dividend (including a dividend payable
in stock of the Company) or make any other distribution with respect to, any
shares of capital stock or any other securities that are convertible into or
exercisable for such stock;
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(b) except as set forth on Schedule 4.13(b), change the nature of
the Company's business to any business which is fundamentally distinct and
separate from the business currently conducted by the Company; or
(c) cause or permit any subsidiary of the Company directly or
indirectly to take any actions described in clauses (a) through (b) above, other
than issuing securities to the Company.
4.14 Indemnification.
(a) If any Purchaser or any of its Affiliates or any officer,
director, partner, controlling person, employee or agent of a Purchaser or any
of its Affiliates (a "RELATED PERSON") becomes involved in any capacity in any
Proceeding brought by or against any Person in connection with or as a result of
the transactions contemplated by the Transaction Documents, the Company will
indemnify and hold harmless such Purchaser or Related Person for its reasonable
legal and other reasonable expenses (including the costs of any investigation
and preparation) and for any Losses incurred in connection therewith, as such
expenses or Losses are incurred, excluding only Losses that result directly from
such Purchaser's or Related Person's gross negligence or willful misconduct. In
addition, the Company shall indemnify and hold harmless each Purchaser and
Related Person from and against any and all Losses, as incurred, arising out of
or relating to any breach by the Company of any of the representations,
warranties or covenants made by the Company in this Agreement or any other
Transaction Document, or any allegation by a third party that, if found to be
true, would constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. If the Company breaches its obligations under any Transaction
Document, then, in addition to any other liabilities the Company may have under
any Transaction Document or applicable law, the Company shall pay or reimburse
the Purchasers on demand for all costs of collection and enforcement (including
reasonable attorneys fees and expenses). Without limiting the generality of the
foregoing, the Company specifically agrees to reimburse the Purchasers on demand
for all costs of enforcing the indemnification obligations in this paragraph.
4.15 Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Underlying Shares under the Transaction Documents or under any other agreement
between the Company and the Purchasers.
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4.16 Delivery of Certificates. In addition to any other rights available
to a Purchaser, if the Company fails to deliver to such Purchaser a certificate
representing Common Stock on the date on which delivery of such certificate is
required by any Transaction Document, and if after such date such Purchaser
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Purchaser of the shares that the
Purchaser anticipated receiving from the Company (a "BUY-IN"), then the Company
shall, within three Trading Days after such Purchaser's request and in such
Purchaser's discretion, either (i) pay cash to such Purchaser in an amount equal
to such Purchaser's total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the "BUY-IN PRICE"), at which
point the Company's obligation to deliver such certificate (and to issue such
Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to such Purchaser a certificate or certificates representing such Common Stock
and pay cash to such Purchaser in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Price on the date of the event giving rise to the
Company's obligation to deliver such certificate.
4.17 Stockholder Approval. The Company shall seek, and use its best
efforts to obtain, on before the date that is the 90th day following the date of
this Agreement or in the event the proxy materials shall be reviewed by the
Commission, the 120th day following the date of this Agreement, stockholder
approval of the issuance of the Underlying Shares, which approval shall meet the
requirements of Nasdaq's Rule 4350(i) of Nasdaq set forth in the NASD Manual
(the "STOCKHOLDER APPROVAL"). The Company shall use its best efforts to call a
meeting of stockholders (the "STOCKHOLDER MEETING") to be held within 75 days
after the date of this Agreement, shall prepare and file with the Commission as
promptly as practical, but in no event later than 30 days after the date of this
Agreement, preliminary proxy materials which set forth a proposal to seek the
Stockholder Approval, and the Board of Directors shall recommend approval
thereof by the Company's stockholders. The Company shall mail and distribute its
proxy materials for the Stockholder Meeting to its stockholders at least 30 days
prior to the date of the Stockholder Meeting, shall actively solicit proxies to
vote for the Stockholder Approval. The Company shall provide the Purchasers an
opportunity to review and comment on such proxy materials by providing (which
may be by e-mail) copies of such proxy materials and any revised preliminary
proxy materials to the Purchasers a reasonable period of time prior to their
filing with the Commission. The Company shall provide the Purchasers (which may
be by e-mail) copies of all correspondence from or to the Commission or its
staff concerning the proxy materials for the Stockholder Meeting promptly after
the same is sent or received by the Company and summaries of any comments of the
Commission staff which the Company receives orally promptly after receiving such
oral comments. The Company shall furnish to the Purchasers and Purchaser Counsel
(which may be by e-mail) a copy of its definitive proxy materials for the
Stockholder Meeting and any amendments or supplements thereto promptly after the
same are first used, mailed to stockholders or filed with the Commission, shall
inform the Purchasers of the progress of solicitation of proxies for such
meeting and shall inform the Purchasers of any adjournment of the Stockholder
Meeting and shall report the result of the vote of stockholders on such
proposition at the conclusion of the Stockholder Meeting.
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ARTICLE V.
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date, except as to those that speak as of a specific date;
(b) Performance. The Company and each other Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by it at or prior to the Closing, except as to those
that speak as of a specific date;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
(d) Adverse Changes. Since the date of execution of this Agreement,
no event or series of events shall have occurred that reasonably would be
expected to have or result in a Material Adverse Effect;
(e) No Suspensions of Trading in Common Stock; Listing. Trading in
the Common Stock shall not have been suspended by the Commission or any Trading
Market (except for any suspensions of trading of not more than one Trading Day
solely to permit dissemination of material information regarding the Company) at
any time since the date of execution of this Agreement, and the Common Stock
shall have been at all times since such date listed for trading on an Eligible
Market;
(f) Stockholder Approval. The Stockholder Approval Condition shall
have been satisfied; and
(g) UCC Filings. All filings of financing statements necessary or
appropriate under the Uniform Commercial Code in connection with the Security
Agreement and the Pledge Agreement shall have been made and the Purchasers shall
have received satisfactory evidence of such filings.
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5.2 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to sell Securities at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date;
(b) Performance. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing; and
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents.
ARTICLE VI.
REGISTRATION RIGHTS
6.1 Shelf Registration.
(a) As promptly as possible, and in any event on or prior to the
Filing Date, the Company shall prepare and file with the Commission a "shelf"
Registration Statement covering the resale of all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. If for any
reason the Commission does not permit all of the Registrable Securities to be
included in such Registration Statement, then the Company shall prepare and file
with the Commission a separate Registration Statement with respect to any such
Registrable Securities not included with the initial Registration Statements, as
expeditiously as possible, but in no event later than the date which is 30 days
after the date on which the Commission shall indicate as being the first date
such filing may be made. The Registration Statement shall be on Form S-3 and
shall contain (except if otherwise directed by the Purchasers) the "Plan of
Distribution", substantially as attached hereto as Exhibit F. In the event the
Form S-3 is not available for the registration of the resale of Registrable
Securities hereunder, the Company shall (i) register the resale of the
Registrable Securities on another appropriate form in accordance herewith and
(ii) attempt to register the Registrable Securities on Form S-3 as soon as such
form is available, provided that the Company shall maintain the effectiveness of
the Registration Statements then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the Commission.
(b) The Company shall use its best efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as possible
after the filing thereof, but in any event prior to the Required Effectiveness
Date, and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the fifth anniversary of
the Effective Date or such earlier date when all Registrable Securities covered
by such Registration Statement have been sold publicly or available or resale
without restriction under Rule 144(k) of the Securities Act (the "EFFECTIVENESS
PERIOD").
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(c) The Company shall notify each Purchaser in writing promptly (and
in any event within two Business Days) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(d) If: (i) any Registration Statement is not filed on or prior to
the Filing Date (if the Company files such Registration Statement without
affording the Purchasers the opportunity to review and comment on the same as
required by Section 6.2(a) hereof, the Company shall not be deemed to have
satisfied this clause (i)), or (ii) the-Company fails to file with the
Commission a request for acceleration in accordance with Rule 461 promulgated
under the Securities Act, within five Trading Days after the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or will not be
subject to further review, or (iii) the Company fails to respond to any comments
made by the Commission within 10 Trading Days after the receipt of such
comments, or (iv) a Registration Statement filed hereunder is not declared
effective by the Commission by the Required Effectiveness Date, or (v) after a
Registration Statement is filed with and declared effective by the Commission,
such Registration Statement ceases to be effective as to all Registrable
Securities to which it is required to relate at any time prior to the expiration
of the Effectiveness Period without being succeeded within 10 Trading Days by an
amendment to such Registration Statement or by a subsequent Registration
Statement filed with and declared effective by the Commission, or (vi) an
amendment to a Registration Statement is not filed by the Company with the
Commission within ten Trading Days after the Commission's having notified the
Company that such amendment is required in order for such Registration Statement
to be declared effective, or (vii) the Common Stock is not listed or quoted, or
is suspended from trading on the Nasdaq Small Cap Market for a period of three
Trading Days (which need not be consecutive Trading Days) (any such failure or
breach being referred to as an "Event," and for purposes of clause (i) or (iv)
the date on which such Event occurs, or for purposes of clause (ii) the date on
which such five Trading Day period is exceeded, or for purposes of clauses
(iii), (v) or (vi) the date which such ten Trading Day-period is exceeded, or
for purposes of clause (vii) the date on which such three Trading Day period is
exceeded, being referred to as "`Event Date"), then: (x) on each such Event Date
the Company shall pay to each Purchaser an amount in cash, as partial liquidated
damages and not as a penalty, equal to 1% of the aggregate purchase price paid
by such Purchaser pursuant to the Purchase Agreement; and (y) on each monthly
anniversary of each such Event Date thereof (if the applicable Event shall not
have been cured by such date) until the applicable Event is cured, the Company
shall pay to each Purchaser an amount in cash, as partial liquidated damages and
not as a penalty, equal to 1% of the aggregate purchase price paid by such
Purchaser pursuant to the Purchase Agreement. Such payments shall be in partial
compensation to the Purchasers and shall not constitute the Purchaser's
exclusive remedy for such events. If the Company fails to pay any liquidated
damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum (or
such lesser maximum amount that is permitted to be paid by applicable law) to
the Purchaser, accruing daily from the date such liquidated damages are due
until such amounts, plus all such interest thereon, are paid in full.
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(e) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
(other than as contemplated in the Transaction Documents) under the Securities
Act of any of its equity securities.
(f) If the Company issues to the Purchasers any Common Stock
pursuant to the Transaction Documents that is not included in the initial
Registration Statement, then the Company shall file an additional Registration
Statement covering such number of shares of Common Stock on or prior to the
Filing Date and shall use it best efforts, but in no event later than the
Required Filing Date, to cause such additional Registration Statement to become
effective by the Commission.
6.2 Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to the
Purchasers and Purchaser Counsel copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Purchasers and
Purchaser Counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file a Registration Statement or any such Prospectus or any amendments
or supplements thereto to which Purchasers holding a majority of the Registrable
Securities shall reasonably object.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Purchasers true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Purchasers thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented
29
(c) Notify the Purchasers of Registrable Securities to be sold and
Purchaser Counsel as promptly as reasonably possible, and (if requested by any
such Person) confirm such notice in writing no later than one Trading Day
thereafter, of any of the following events: (i) the Commission notifies the
Company whether there will be a "review" of any Registration Statement; (ii) the
Commission comments in writing on any Registration Statement (in which case the
Company shall deliver to each Purchaser a copy of such comments and of all
written responses thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or any other
Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information
related thereto; (v) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included or incorporated by reference
in any Registration Statement become ineligible for inclusion or incorporation
therein or any statement made in any Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference is
untrue in any material respect or any revision to a Registration Statement,
Prospectus or other document is required so that it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
(e) Furnish to each Purchaser and Purchaser Counsel, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(f) Promptly deliver to each Purchaser and Purchaser Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
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(g) (i) In the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as possible thereafter; (iii) provide to the
Purchasers evidence of such listing; and (iv) maintain the listing of such
Registrable Securities on each such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Purchasers and
Purchaser Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Purchaser requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement.
(i) Cooperate with the Purchasers to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by this Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Purchasers may request.
(j) Upon the occurrence of any event described in Section
6.2(c)(vii), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Cooperate with any due diligence investigation undertaken by the
Purchasers in connection with the sale of Registrable Securities, including,
without limitation, by making available any documents and information; provided
that the Company will not deliver or make available to any Purchaser material,
nonpublic information unless such Purchaser specifically requests in advance to
receive material, nonpublic information in writing.
(l) Comply with all applicable rules and regulations of the
Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company and up to $5,000 for the Purchaser
Counsel, (e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, and (f) all listing fees to be paid by the Company to the Trading
Market.
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6.4 Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Purchaser, the officers, directors, partners, members, agents, brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Purchaser (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, partners,
members, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all Losses, as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount by which the net proceeds received by such
Purchaser upon the sale of the Registrable Securities giving rise to such
indemnification obligation exceeds the amount paid, directly or indirectly, by
such Purchaser for such Registrable Securities.
(b) Indemnification by Purchasers. Each Purchaser shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.
32
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall only be responsible for
one counsel as it relates to a similar or related group of claim. The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
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All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 20 Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
6.4(a) or (b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
34
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Except as set forth on Schedule 3.1(x),
neither the Company nor any of its security holders (other than the Purchasers
in such capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right to any of its security holders.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within 10 Business Days after receipt of such notice,
any such Purchaser shall so request in writing, the Company shall include in
such registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII.
Miscellaneous
7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the 125th day following the date of this Agreement; provided that
no such termination will affect the right of any party to xxx for any breach by
the other party (or parties) and further provided that failure to satisfy the
conditions set forth in Article 5 shall not result in a liability to the
Company.
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7.2 Fees and Expenses. At the Closing, the Company shall pay to Vertical
Ventures, LLC an aggregate of $40,000 for their legal fees and expenses incurred
in connection with the preparation and negotiation of this Agreement, of which
amount $10,000 has been previously paid by the Company. In lieu of the foregoing
remaining payment, Vertical Ventures, LLC may retain such amount at the Closing.
Except as expressly set forth in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the issuance of any Securities.
7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile (facsimile confirmed) at
the facsimile number specified in this Section prior to 5:30 p.m. (New York City
time) on a Trading Day, (ii) the Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Agreement later than 5:30 p.m. (New York City time) on any
date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the
Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as follows:
If to the Company: Visual Data Corporation
0000 XX 00 Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxxx
Fax No.: (000) 000-0000
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With a copy to: With a copy to:
Xxxxxx & Xxxx, P.A.
000 Xxxx Xxx Xxxx Xxxx., Xxxxx 0000
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxxx
Fax No.: (000) 000-0000
If to the Purchasers: To the address set forth under such
Purchaser's name on the signature pages
attached hereto.
or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver 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 subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Purchasers under Article VI and
that does not directly or indirectly affect the rights of other Purchasers may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.
7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers." Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.
7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.14 and each Indemnified Party is an intended third
party beneficiary of Section 6.4 and (in each case) may enforce the provisions
of such Sections directly against the parties with obligations thereunder.
37
7.9 Governing Law; Venue; Waiver of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by any
of the Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in The
City of New York, Borough of Manhattan. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of this
Agreement), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) 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 process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or any
of the Transaction Documents or the transactions contemplated hereby or thereby.
If either party shall commence an action or proceeding to enforce any provisions
of this Agreement or any Transaction Document, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its reasonable
attorneys fees and other reasonable costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
7.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise and/or
conversion of the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
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7.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises 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 such
Purchaser may rescind or withdraw, in its 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.
7.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
7.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages (exclusive of
punitive, special consequential or similar damages), each of the Purchasers and
the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
7.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to the Additional Investment
Rights or any Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
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7.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "MAXIMUM RATE"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate of interest applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.
7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Notes pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. The Company hereby confirms that it understands and agrees
that the Purchasers are not acting as a "group" as that term is used in Section
13(d) of the Exchange Act. Each Purchaser acknowledges that no other Purchaser
has acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Transaction
Documents and that Proskauer Rose LLP represents only Vertical Ventures, LLC in
connection with this Agreement and the Transaction Documents.
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7.19 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in this Agreement to a number of shares or a price per share shall be
amended to appropriately account for such event.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
VISUAL DATA CORPORATION
By:_____________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS FOLLOW.]
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Exhibits:
---------
A. Form of Additional Investment Right
B. Form of Note
C. Transfer Agent Instructions
D. Form of Warrant
E. Opinion of Company Counsel
F. Plan of Distribution
G. Form of Pledge Agreement
H. Form of Security Agreement
Schedules:
----------
3.1(a) Subsidiaries
3.1(g) Capitalization
3.1(l) Compliance
3.1(t) Certain Fees
3.1(x) Registration Rights
3.1(dd) Seniority
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