EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as
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of June 30, 2003, among Applied Digital Solutions, Inc., a Missouri
corporation (the "Company"), and the purchasers identified on the signature
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pages hereto (each, including its successors and assigns, a "Purchaser" and
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collectively the "Purchasers").
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WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act") and Rule 506 promulgated thereunder, the
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Company desires to issue and sell to the Purchasers, and each Purchaser,
severally and not jointly, desires to purchase from the Company, securities
of the Company as more fully described in this Agreement;
WHEREAS, the Company has authorized of the issuance of $10,500,000
principal amount of 8.5% Convertible Exchangeable Debentures, which
Debentures shall be, subject to the terms therein, (i) convertible into
shares of the common stock of the Company or (ii) exchangeable for up to an
aggregate of 15,000,000 shares of the common stock of Digital Angel
Corporation; and
WHEREAS, the Company is agreeing to pledge the shares of common
stock of Digital Angel Corporation to secure its obligations (i) to pay
interest on and principal of the Debentures and (ii) to deliver such shares
to the Purchasers upon exchange or otherwise pursuant to the terms of the
Debentures.
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 the Purchaser
agrees as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in
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this Agreement: (a) capitalized terms that are not otherwise defined herein
have the meanings given to such terms in the Debenture (as defined herein),
and (b) the following terms have the meanings indicated in this Section 1.1:
"Actual Minimum" means, as of any date, the maximum
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aggregate number of shares of Common Stock then issued or
potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise
or conversion in full of all Warrants and Debentures, ignoring any
conversion or exercise limits set forth therein, and assuming all
interest thereon is paid in shares of Common Stock and any
previously unconverted Debentures are held until the 29th month
anniversary of the date of issuance of the Debentures.
"Affiliate" means any Person that, directly or indirectly,
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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.
"Capital Shares" means the Common Stock and any shares of
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any other class of common stock whether now or hereafter
authorized, having the right to participate in the distribution of
earnings and assets of the Company.
"Capital Shares Equivalents" means any securities, rights
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or obligations that are convertible into or exchangeable for or
give any right to subscribe for or purchase, directly or
indirectly, any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase, directly or
indirectly, Capital Shares or any such convertible or exchangeable
securities.
"Closing" means the closing of the purchase and sale of
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the Securities pursuant to Section 2.1.
"Commission" means the Securities and Exchange Commission.
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"Common Stock" means the common stock of the Company, par
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value $0.001 per share, and any securities into which such common
stock shall hereinafter have been reclassified into.
"Company Closing Price" shall mean $0.4904.
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"Company Counsel" means Holland & Knight LLP.
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"Debenture" means, the 8.5% Convertible Exchangeable
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Debenture due 29 months from its date of issuance unless otherwise
set forth therein, issued by the Company to the Purchasers
hereunder, in the form of Exhibit A.
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"Disclosure Schedules" shall have the meaning ascribed to
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such term in Section 3.1 hereof.
"DOC" shall mean Digital Angel Corporation.
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"DOC Closing Price" shall mean $2.761.
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"DOC Common Stock" means the common stock, $0.005 par
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value per share, of DOC and stock of any other class into which
such shares may hereafter have been reclassified or changed.
"DOC VWAP" means, for any date, the price determined by
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the first of the following clauses that applies: (a) if the DOC
Common Stock is then listed or quoted on a Principal Market or the
OTC Bulletin Board, the daily volume weighted average price of the
DOC Common Stock for such date (or the nearest preceding date) on
the Principal Market (or OTC Bulletin Board) on which the DOC
Common Stock is then listed or
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quoted as reported by Bloomberg Financial L.P. (based on a Trading
Day from 9:30 a.m. ET to 4:02 p.m. Eastern Time) using the VAP
function; (b) if the DOC Common Stock is not then listed or quoted
on a Principal Market or the OTC Bulletin Board and if prices for
the DOC 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 DOC
Common Stock so reported; or (c) in all other cases, the fair
market value of a share of DOC Common Stock as determined by a
nationally recognized independent appraiser selected in good faith
by Purchasers' Representative.
"DOC Shares" means the shares of DOC Common Stock pledged
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to the Holders of the Debentures pursuant to the terms of the
Pledge Agreement entered into in connection with the Purchase
Agreement, which shares when transferred in accordance with the
terms hereunder shall be fully paid and nonassessable.
"DOC Warrant Shares" shall mean the shares of DOC Shares
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issuable upon exercise of the Warrants.
"Effective Date" means the date the Registration Statement
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is first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934,
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as amended.
"Exempt Transaction" shall have the meaning ascribed to
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such term in Section 4.9 hereof.
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices at 420
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Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
"GAAP" shall have the meaning ascribed to such term in
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Section 3.1(h) hereof.
"Liens" shall have the meaning ascribed to such term in
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Section 3.1(a) hereof.
"Losses" means any and all losses, claims, damages,
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liabilities, settlement costs and expenses, including without
limitation costs of preparation and reasonable attorneys' fees.
[OMITTED FOR CONFIDENTIALITY]
"Material Adverse Effect" shall have the meaning assigned
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to such term in Section 3.1(b) hereof.
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"Person" means an individual or corporation, partnership,
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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 June
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30, 2003 by the Company in favor of the Purchasers pledging
15,000,000 shares of DOC Common Stock as security for the payment
of the Debentures, in the form of Exhibit E hereto.
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"Principal Market" means the American Stock Exchange, the
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New York Stock Exchange, the NASDAQ Small-Cap Market or the NASDAQ
National Market, whichever is at the time the principal trading
exchange or market for the Common Stock or the DOC Common Stock, as
the case may be, based upon share volume.
"Proxy" means the Company's proxy statement (as filed with
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the Commission) for the Company's 2003 annual meeting of
shareholders, scheduled for July 25, 2003.
"Purchasers' Representative" means Midsummer Investment,
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Ltd. If at any time Purchasers' Representative no longer holds
Debentures or Warrants or declines to serve as Purchasers'
Representative, then Purchasers' Representative shall appoint a
holder of Warrants or Debentures to serve as new Purchasers'
Representative and shall notify the other Purchasers and the
Company of such appointment.
"Proceeding" means an action, claim, suit, investigation
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or proceeding (including, without limitation, an investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
"Registration Rights Agreement" means the Registration
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Rights Agreement, dated the Closing Date, among the Company and the
Purchasers, in the form of Exhibit B.
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"Required Approvals" shall have the meaning ascribed to
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such term in Section 3.1(e) hereof.
"Required Minimum" means, as of any date, the maximum
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aggregate number of shares of Common Stock then issued or
potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise
or conversion in full of all Warrants and Debentures, ignoring any
conversion or exercise limits set forth therein, and assuming that
all interest is paid in shares of Common Stock and any previously
unconverted Debenture is held until the 29th month anniversary of
its date of issuance or, if earlier, until maturity, and the then
Set Price at all times on and after the date of determination
equals 75% of the actual Set Price.
"Rule 144" means Rule 144 promulgated by the Commission
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pursuant to the Securities Act, as such Rule 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.
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"SEC Reports" shall have the meaning ascribed to such term
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in Section 3.1(h) hereof.
"Securities" means the Debentures, Warrants and the
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Underlying Shares.
"Security Agreement" means that certain Security Agreement
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dated June 30, 2003 by the Company and by Computer Equity
Corporation in favor of the Purchasers granting a security interest
in the accounts receivable of such entities as security for the
payment of the Debentures, in the form of Exhibit F hereto.
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"Securities Act" means the Securities Act of 1933, as
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amended.
"Set Price" shall have the meaning ascribed to such term
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in the Debentures.
"Shareholder Approval" shall have the meaning ascribed to
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such term in Section 4(a)(ii)(B) of the Debenture.
"Subscription Amount" means, as to each Purchaser, the
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amount set forth below such Purchaser's signature block on the
signature pages hereto and next to the heading "Subscription
Amount" in United States dollars and in immediately available
funds.
"Subsidiary" means any operating subsidiary of the Company
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except for DOC and its subsidiaries and except for InfoTech USA,
Inc. and its subsidiaries.
"Trading Day" means any day during which the Principal
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Market shall be open for business.
"Transaction Documents" means this Agreement, the
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Debentures, the Warrants, the Pledge Agreement, the Trust
Agreement, the Registration Rights Agreement and any other
documents or agreements executed in connection with the
transactions contemplated hereunder.
"Trust Agreement" means that certain Trust Agreement of
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the Digital Angel Share Trust between Wilmington Trust Company and
the Company, dated as of March 1, 2002, as amended June 30, 2003.
"Trustee" means Wilmington Trust Company, a Delaware banking
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corporation.
"Underlying Shares" means the shares of Common Stock
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issuable upon conversion of the Debentures and upon exercise of the
Warrants and issued and issuable in lieu of the cash payment of
interest on the Debentures.
"Underlying Shares Registration Statement" or
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"Registration Statement" means a registration statement meeting the
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requirements set forth in the Registration Rights Agreement and
covering the resale of the Underlying Shares by each Purchaser as
provided for in the Registration Rights Agreement.
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"VWAP" means, for any date, the price determined by the
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first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on a Principal Market, the daily
volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the Principal Market on which the
Common Stock is then listed or quoted as reported by Bloomberg
Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time
to 4:02 p.m. Eastern Time); (b) if the Common Stock is not then
listed or quoted on a Principal Market and if prices for the Common
Stock are then quoted on the OTC Bulletin Board, the volume
weighted average price of the Common Stock for such date (or the
nearest preceding date) on the OTC Bulletin Board; (c) if the
Common Stock is not then listed or quoted on the OTC Bulletin Board
and 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 a
nationally recognized-independent appraiser selected in good faith
by Purchasers' Representative.
"Warrants" means collectively the Common Stock Purchase
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Warrants, in the form of Exhibit C delivered to the Purchasers at
the Closing in accordance with Section 2.2 hereof, with a term of
exercise of 4 years.
"Warrant Shares" means the shares of Common Stock issuable
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upon exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. On or before June 30, 2003, upon the terms and
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subject to the conditions set forth herein, the Company agrees to sell, and
the Purchasers agree to purchase in the aggregate, severally and not
jointly, $10,500,000 principal amount of the Debentures. Each Purchaser
shall deliver to, or as directed by, the Company via wire transfer or a
certified check immediately available funds equal to their Subscription
Amount and the Company shall deliver to such Purchaser a Debenture
evidencing a principal amount equal to such Purchaser's Subscription Amount
and the other items set forth in Section 2.2 issuable at the Closing. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall
occur at the offices of FW, or such other location as the parties shall
mutually agree.
2.2 Closing Conditions. Upon satisfaction or waiver by the party
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sought to be benefited thereby of the conditions set forth in this Section
2.2, the Closing shall occur.
(a) At or prior to the Closing, the Company shall
deliver or cause to be delivered to each Purchaser the following:
(i) a Debenture with a principal amount equal
to such Purchaser's Subscription Amount, registered in the
name of such Purchaser;
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(ii) a Warrant to purchase up to either (or any
combination thereof) (A) a number of shares of Common
Stock equal to 25% of such Purchaser's Subscription Amount
divided by the Company Closing Price and an exercise price
per Warrant Share equal to 115% of the Company Closing
Price, subject to adjustment therein or (B) a number of
DOC Shares equal to 25% of such Purchaser's Subscription
Amount divided by the DOC Closing Price and an exercise
price per DOC Warrant Share equal to 115% of the DOC
Closing Price, subject to adjustment therein;
(iii) a legal opinion of Company Counsel, in the
form of Exhibit D attached hereto, addressed to the
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Purchasers;
(iv) Trust Agreement, executed by the Company
and Trustee;
(v) a copy of the Final Payment Notice (as
defined in the Trust Agreement) with an acknowledgement of
receipt executed by the Trustee;
(vi) a written acknowledgement from IBM Credit
LLC of the repurchase by the Company of the Loans and
other Obligations pursuant to the Forbearance Agreement,
Consent and Agreement among the Company, the Trustee, IBM
Credit LLC, and other parties, dated as of April 2, 2003;
(vii) the Registration Rights Agreement duly
executed by the Company;
(viii) the Pledge Agreement executed by the
Company; and
(ix) the Security Agreement executed by the
Company and by Computer Equity Corporation.
(b) At or prior to the Closing, each Purchaser shall
deliver or cause to be delivered to the Company the following:
(i) such Purchaser's Subscription Amount;
(ii) the Registration Rights Agreement duly
executed by such Purchaser.
(c) All representations and warranties of the other
party contained herein shall remain true and correct as of the
Closing Date and all covenants of the other party shall have been
performed;
(d) There shall have been no Material Adverse Effect
(as defined in Section 3.1(b) hereof) with respect to the Company or
with DOC since the date hereof;
(e) From the date hereof to the Closing Date, trading
in the Common Stock or in DOC Common Stock shall not have been
suspended by the Commission (except for any suspension of trading
of limited duration agreed to by the Company, which
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suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as
reported by Bloomberg Financial Markets shall not have been
suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such
service, or on the Principal Market, nor shall a banking moratorium
have been declared either by the United States or New York State
authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the
reasonable judgment of the Purchasers, makes it impracticable or
inadvisable to purchase the Debentures at the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except:
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(i) as set forth under the corresponding section of the disclosure schedules
delivered to the Purchasers concurrently herewith (the "Disclosure
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Schedules") which Disclosure Schedules shall be deemed a part hereof, (ii)
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as set forth in the SEC Reports, and (iii) in connection with the
indebtedness to IBM Credit LLC which is being satisfied at the Closing, the
Company hereby makes the representations and warranties set forth below to
the Purchasers.
(a) Subsidiaries. Except as set forth in the SEC
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Reports, the Company has no direct or indirect Subsidiaries. Except
for employee/director stock options, the Company owns, directly or
indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any lien, charge, security
interest, encumbrance, right of first refusal or other restriction
(collectively, "Liens"), and all the issued and outstanding shares
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of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar
rights. Subsidiaries as used herein shall not include DOC or its
subsidiaries or InfoTech USA, Inc. or its subsidiaries.
(b) Organization and Qualification. Each of the Company
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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 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 do 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, would not,
individually or in the aggregate: (i) materially adversely affect
the legality, validity or enforceability of any Transaction
Document, (ii) have or result in or be reasonably likely to have or
result in a material adverse effect on the results of operations,
assets, prospects, business or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (iii)
materially adversely impair the Company's ability to perform fully
on
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a timely basis its obligations under any of the Transaction
Documents (any of (i), (ii) or (iii), a "Material Adverse Effect").
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(c) Authorization; Enforcement. The Company has the
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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 or
thereunder, including to issue the securities and to pledge and
transfer the DOC Shares in accordance with the terms hereof and
thereof. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby, including the pledging
and transfer of the DOC Shares, 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 other than Required Approvals.
Each of the Transaction Documents has been (or upon delivery will
be) 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, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and
general principles of equity. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, by-laws or
other organizational or charter documents.
(d) No Conflicts. The execution, delivery and performance
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of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated thereby (including the
pledge and any transfer of the DOC Shares and reservation for
issuance and issuance of the Conversion Shares) 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, bylaws
or other organizational or charter documents, or (ii) subject to
obtaining the Required Approvals, 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 agreement, credit
facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding 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 in the case of each of
clauses (ii) and (iii), such as would not, individually or in the
aggregate, reasonably be expected to have or result in a Material
Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company
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nor any Subsidiary is 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
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and performance by the Company of the Transaction Documents, other
than (i) the filings required under Section 4.10, (ii) the filing
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with the Commission of the Underlying Shares Registration
Statement, (iii) the notice and/or application(s) to each
applicable Principal Market for the issuance and sale of the
Debentures and Warrants and the listing of the Underlying Shares
for trading thereon in the time and manner required thereby, (iv)
the filing of Form D with the Commission and applicable Blue Sky
filings, and (v) the consent of shareholders as discussed in the
Proxy and as set forth in Section 4.5 hereof (collectively, the
"Required Approvals").
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(f) Issuance of the Securities. The Securities are duly
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authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued,
fully paid and non-assessable, free and clear of all Liens. The
Company has reserved from its duly authorized capital stock a
number of shares of Common Stock for issuance of the Underlying
Shares at least equal to the Required Minimum on the date hereof.
The Company has not, and to the knowledge of the Company, no
Affiliate of the Company has sold, offered for sale or solicited
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, or that would be
integrated with the offer or sale of the Securities for purposes of
the rules and regulations of any Principal Market.
(g) Capitalization. The number of shares and type of all
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authorized, issued and outstanding capital stock of the Company is
set forth in the Disclosure Schedules attached hereto. 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,
there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever
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 issuance 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
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filed all reports required to be filed by it under the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials, along with the Company's filings pursuant to the
Securities Act, being collectively referred to herein as the "SEC
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Reports" and, together with the Schedules to this Agreement, the
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"Disclosure Materials") on a timely basis or has received a valid
--------------------
extension of such time
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of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has identified and
made available 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
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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
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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 would
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 or similar plans.
(j) Litigation. There is no action, suit, inquiry, notice
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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
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or challenges the legality, validity or enforceability of any of
the Transaction Documents or the Securities or (ii) would, if there
were an unfavorable decision, individually or in the aggregate,
have or reasonably be expected to 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. Except in connection with responses to the
informal investigation by the Southeast Regional Office of the
Commission, the Company does not have pending before the Commission
any request for confidential
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treatment of information. 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) Compliance. 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
agreement or 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, except in each case as would not, individually or in the
aggregate, reasonably be expected to have or result in a Material
Adverse Effect.
(l) 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.
(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
necessary to conduct their respective businesses as described in
the SEC Reports, except where the failure to possess such permits
would not, individually or in the aggregate, have or reasonably be
expected to 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 and the Subsidiaries have
---------------
good and marketable title in fee simple to all real property owned
by them that is material to the business of the Company and the
Subsidiaries and 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 under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in 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
necessary or material for use in connection with their respective
businesses as described in the SEC Reports and
-12-
which the failure to so have would reasonably be expected to have a
Material Adverse Effect (collectively, the "Intellectual Property
---------------------
Rights"). 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. To the best of Company's knowledge, such
insurance contracts and policies are accurate and complete. Neither
the Company nor any Subsidiary has any reason to believe 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
------------------------------------------
is so minor as to not require disclosure under the Exchange Act and
applicable regulations, none of the 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.
(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. The
Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company
and designed such disclosures controls and procedures to ensure
that material information relating to the Company, including its
subsidiaries, is made known to the certifying officers by others
within those entities, particularly during the period in which the
Company's Form 10-K or 10-Q, as the case may be, is being prepared.
The Company's certifying officers have evaluated the effectiveness
of the Company's controls and procedures as of a date within 90
days prior to the filing date of the Form 10-Q for the quarter
ended March 31, 2003 (such date, the "Evaluation Date"). The
---------------
Company presented in the Form 10-Q for the quarter ended March 31,
2003 the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no significant changes in the Company's
internal controls (as such term is defined in Item 307(b) of
Regulation
-13-
S-K under the Exchange Act) or, the Company's knowledge, in other
factors that would reasonably be expected to significantly affect
the Company's internal controls.
(s) Solvency/Indebtedness. Based on the financial
---------------------
condition of the Company as of each Closing Date: (i) the fair
saleable value of the Company's 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). The Company has no knowledge of any facts or circumstances
which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any
jurisdiction within one year from the Closing Date. The SEC Reports
set forth as of the dates thereof all material outstanding secured
and unsecured Indebtedness of the Company or any Subsidiary, or for
which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any
------------
liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course
of business), (b) all guaranties, endorsements and other contingent
obligations, whether or not the same are or should be reflected in
the Company's balance sheet or the notes thereto, except guaranties
by endorsement of negotiable instruments for deposit or collection
in the ordinary course of business, and (c) the present value of
any lease payments in excess of $50,000 due under leases required
to be capitalized in accordance with GAAP. Neither the Company nor
any Subsidiary is in default with respect to any Indebtedness.
(t) Certain Fees. 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, and the Company has
not taken any action that would cause any Purchaser to be liable
for any such fees or commissions. The Company agrees that the
Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of any Person for
fees of the type contemplated by this Section with the transactions
contemplated by this Agreement.
(u) Private Placement. Assuming the accuracy of the
-----------------
representations and warranties of the Purchasers set forth in
Sections 3.2(b)-(f), the offer, issuance and sale of the Securities
to the Purchasers as contemplated hereby are exempt from the
registration requirements of the Securities Act. The issuance and
sale of the Securities hereunder does not contravene the rules and
regulations of the Principal Market except that
-14-
Shareholder Approval is required for the Company to issue in excess
of 7,200,000 shares of Common Stock under the Transaction
Documents.
(v) Listing and Maintenance Requirements. The Company has
------------------------------------
not, in the 12 months preceding the date hereof, received notice
from any Principal 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
Principal Market. The Company is, and has no reason to believe it
will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements, other than the
$1 minimum bid price requirement.
(w) Registration Rights. Other than to IBM Credit LLC and
-------------------
to shareholders whose shares are included in the registration
statement of Form S-1 filed by the Company in June 2003, 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.
(x) 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 as a result of the Company's issuance of the
Securities and the Purchasers' ownership of the Securities.
(y) Seniority. As of the Closing Date, no indebtedness of
---------
the Company will be senior to the Debentures in right of payment,
whether with respect to interest or upon liquidation or
dissolution, or otherwise, other than indebtedness secured by
purchase money security interests (which is senior only as to
underlying assets covered thereby) and capital lease obligations
(which is senior only as to the property covered thereby).
(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, nonpublic information.
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 with respect to the
representations and warranties made herein are true and correct
with respect to such representations and warranties 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. The Company acknowledges and agrees that no
Purchaser
-15-
makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.
(aa) Form S-3 Eligibility. The Company is not eligible to
--------------------
register the resale of the Underlying Shares for resale by the
Purchaser on Form S-3 promulgated under the Securities Act.
(bb) Tax Status. The Company and each of its Subsidiaries
----------
has made or filed all federal, state and foreign income and all
other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent
that the Company and each of its Subsidiaries has set aside on its
books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its
books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for
any such claim. The Company has not executed a waiver with respect
to the statute of limitations relating to the assessment or
collection of any foreign, federal, statue or local tax. None of
the Company's tax returns is presently being audited by any taxing
authority.
(cc) Acknowledgment Regarding Purchasers' Purchase of
------------------------------------------------
Securities. The Company acknowledges and agrees that the Purchasers
----------
are acting solely in the capacity of arm's length purchasers 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 in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Purchaser or any
of their respective representatives or agents in connection with
this Agreement and the transactions contemplated hereby is not
advice or a recommendation and is merely incidental to the
Purchasers' 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.
(dd) No General Solicitation or Advertising in Regard to
---------------------------------------------------
this Transaction. Neither the Company nor, to the knowledge of the
----------------
Company, any of its directors or officers (i) has conducted or will
conduct any general solicitation (as that term is used in Rule
502(c) of Regulation D) or general advertising with respect to the
sale of the Debentures or the Warrants, or (ii) made any offers or
sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the
Debentures, the Underlying Shares or the Warrants under the
Securities Act or made any "directed selling efforts" as defined in
Rule 902 of Regulation S.
-16-
(ee) No Disagreements with Accountants and Lawyers. There
---------------------------------------------
are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the accountants and
lawyers formerly or presently employed by the Company and the
Company is current with respect to any fees owed to its accountants
and lawyers.
(ff) DOC Common Stock.
----------------
(i) The DOC Shares have been registered by DOC
under the Securities Act. 19,600,000 shares of DOC Common
Stock were registered by DOC pursuant to a registration
statement filed on Form S-1/A on January 21, 2003 (the
"DOC Registration Statement"). The "Plan of Distribution"
--------------------------
section under each of the DOC Registration Statement
permits the pledge and transfer of the DOC Shares as
required pursuant to the Transaction Documents.
(ii) The Company is the beneficial owner and the
Trustee is the record owner of all of the DOC Shares, free
and clear of any Liens, and upon transfer in accordance
with the applicable Transaction Documents, the Company and
the Trustee will transfer to the Purchasers good and
marketable title to such DOC Shares, free and clear of any
Liens. Upon any such transfer to the Purchasers of any DOC
Shares, and assuming Purchasers are not deemed to be
underwriters, and otherwise assuming compliance with the
plan of distribution, the DOC Shares shall be unrestricted
and freely tradable on the Principal Market without any
prospectus delivery or other requirements whatsoever and
without the need to make any registration or other filing
with the Commission.
(iii) As of the Closing, the Company will have no
legal obligation, absolute or contingent, to any other
Person to transfer or sell any of the DOC Shares. There is
no action, claim, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened by
or against or affecting the Company or the DOC Shares
before any court or governmental or regulatory authority
or body, that could effect the ability of the Company to
pledge and transfer to the Purchasers any DOC Shares.
There are no writs, decrees, injunctions or orders of any
court or governmental or regulatory agency, authority or
body outstanding against the Company with respect to the
DOC Shares.
3.2 Representations and Warranties of the Purchasers. Each
------------------------------------------------
Purchaser hereby, for itself 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 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 thereunder.
The purchase by such Purchaser of the Securities hereunder has been
duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights
Agreement have been duly executed
-17-
by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute 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 as principal for its own account for investment purposes
only and not with a view to or for distributing or reselling such
Securities or any part thereof, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement, at
all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under
the Securities Act or under an exemption from such registration and
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. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any
agreement or understanding, directly or indirectly, with any Person
to distribute any of the Securities.
(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 any Warrants or converts any
Debentures it will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act. Such Purchaser has not been formed
solely for the purpose of acquiring the Securities. 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.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
---------------------
(a) The Securities may only be disposed of in compliance
with state and federal securities laws. In connection with any
transfer of Securities other than pursuant to an effective
registration statement, to the Company or to an Affiliate of a
Purchaser, the Company may require the transferor thereof to
provide to the Company an opinion of
-18-
counsel selected by the transferor and reasonably satisfactory to
the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities 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 and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any
--------------
certificate evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [EXERCISABLE] [CONVERTIBLE]] 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 ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS, ALL AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. 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
SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement or grant a
security interest in some or all of the Securities and, if required
under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties.
If required by the Company's transfer agent in order to effect a
pledge, the Company shall cause its counsel, at no cost to the
Purchasers, to issue an opinion of counsel to the Company's
transfer agent. 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.
(c) Certificates evidencing Underlying Shares shall not
contain any legend (including the legend set forth in Section
4.1(b) hereof): (i) while a registration statement
-19-
(including the Underlying Shares Registration Statement) covering
the resale of such security is effective under the Securities Act,
or (ii) following any sale of such Underlying Shares pursuant to
Rule 144, or (iii) if such Underlying Shares 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); provided, however, in connection with the issuance of
-------- -------
the Underlying Shares, each Purchaser, severally and not jointly
with the other Purchasers, hereby agrees to adhere to and abide by
all prospectus delivery requirements under the Securities Act and
Commission Regulations. If all or any portion of a Debenture or
Warrant is converted or exercised (as applicable) at a time when
there is an effective registration statement to cover the resale of
the Underlying Shares, or if such Underlying Shares may be sold
under Rule 144(k) or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations thereof) then such Underlying Shares shall be
issued free of all legends. The Company agrees that following the
Effective Date or at such time as such legend is no longer required
under this Section 4.1(c), it will, no later than five Trading Days
following the delivery by a Purchaser to the Company or the
Company's transfer agent of a certificate representing Underlying
Securities issued with a restrictive legend, deliver or cause to be
delivered to such Purchaser a certificate representing such shares
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 this Section.
(d) In addition to such Purchaser's other available
remedies, the Company shall pay to a Purchaser, in cash, as
liquidated damages and not as a penalty, for each $1,000 of
Underlying Shares (based on the VWAP of the Common Stock on the
date such Securities are submitted to the Company's transfer agent)
delivered for removal of the restrictive legend and subject to this
Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading
Day 3 Trading Days after such damages have begun to accrue) for
each Trading Day after such fifth Trading Day until such
certificate is delivered without a legend.
4.2 Acknowledgment of Dilution. The Company acknowledges that the
--------------------------
issuance of the Securities may 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 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 the Company may have against any Purchaser and
regardless of the dilutive effect that such issuance may have on the
ownership of the other stockholders of the Company. The Company further
acknowledges that the Purchasers may have entered into short sales of the
Common Stock and DOC Common Stock and may continue to enter into short sales
of the Common Stock and DOC Common Stock, in accordance with applicable laws
and regulations, for purposes of hedging. The Company agrees that it will
not raise any claims in connection with any such trading activity referred
to in the prior sentence (nor will the Company support any claims by third
parties in connection with any such trading activity).
-20-
4.3 Furnishing of Information. As long as any Purchaser owns
-------------------------
Securities, the Company covenants 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 Rule 144(c) 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, all to the extent required from
time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
4.4 Integration. The Company shall not, and shall use its best
-----------
efforts to ensure that no Affiliate of the Company shall, 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, or that would be integrated with the offer or
sale of the Securities for purposes of the rules and regulations of any
Principal Market.
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.
(b) If, on any date, the number of authorized but unissued
(and otherwise unreserved) shares of Common Stock is less than 200%
of (i) the Actual Minimum on such date, minus (ii) the number of
shares of Common Stock previously issued pursuant to the
Transaction Documents, then the Board of Directors of the Company
shall use commercially reasonable efforts to amend the Company's
certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the
Required Minimum at such time (minus the number of shares of Common
Stock previously issued pursuant to the Transaction Documents), as
soon as possible and in any event not later than the 90th day after
such date; provided that the Company will not be required at any
time to authorize a number of shares of Common Stock greater than
the maximum remaining number of shares of Common Stock that could
possibly be issued after such time pursuant to the Transaction
Documents.
(c) The Company shall: (i) prior to Closing, prepare and
file with such Principal Market an additional shares listing
application covering a number of shares of Common Stock at least
equal to the Required Minimum on the date of such application, (ii)
take all steps necessary to cause such shares of Common Stock to be
approved for listing on the Principal Market as soon as possible
thereafter, (iii) provide to the Purchasers evidence of such
listing, and (iv) maintain the listing of such Common Stock on such
Principal Market or another Principal Market. In addition, the
Company shall
-21-
hold a special meeting of shareholders at the earliest practical
date, but in no event later than September 15, 2003, for the
purpose of obtaining a proposal for Shareholder Approval, with the
recommendation of the Company's Board of Directors that such
proposal be approved, and the Company shall solicit proxies from
its shareholders in connection therewith in the same manner as all
other management proposals in such proxy statement and all
management-appointed proxyholders shall vote their proxies in favor
of such proposal. Further, the Company shall use commercially
reasonable efforts to obtain the written agreement of Xxxxxxx X.
Xxxxxxxx to vote all Common Stock owned by him as of the record
date for such meeting in favor of such proposal.
4.6 DOC Registration Statements. At the Closing, the Company
---------------------------
shall deliver to each Purchaser a true, correct and complete copy of each
prospectus pursuant to the DOC Registration Statement. Any transfer of the
DOC Shares by the Company to the Purchasers shall be made pursuant to the
DOC Registration Statement if it shall then be effective, and otherwise by
any other method acceptable to each holder. The Company hereby agrees to use
its reasonable best efforts to cause DOC to, until the date that the Company
shall have transferred the DOC Shares to the Purchasers or none of the
Debentures is outstanding, keep the DOC Registration Statement continuously
effective under the Securities Act and, if and when the Company deems it
necessary, use reasonable best efforts to cause DOC to file one or more
prospectus supplements pursuant to Rule 424(b). The Company shall take all
actions necessary such that the DOC Shares shall remain free of any Lien.
The Company hereby assigns all of its rights and privileges under any
registration rights agreements with DOC to the extent necessary to allow the
Purchasers to enforce such rights with respect to the DOC Shares directly
against the DOC.
4.7 Transfer of DOC Shares. Upon transfer of any DOC Shares to a
----------------------
Purchaser pursuant to the terms of the Transaction Documents, including,
without limitation, pursuant to an exchange under the Debentures, the
Company shall take all actions necessary to transfer to Purchaser, in
accordance with the applicable terms of the Transaction Documents, the DOC
Shares free and clear of all Liens or restrictions such that after such
transfer the DOC Shares will be unrestricted and freely tradable by the
Purchaser. In connection with the foregoing, the Company shall (i) deliver
any prospectus supplement dated after the Closing Date, (ii) cause its
counsel to deliver to the transfer agent of DOC a legal opinion, if required
by the transfer agent to issue any DOC Shares free of a legend, and (iii)
use reasonable best efforts to take any other actions reasonably requested
by any Purchaser in connection with any such transfer. Upon satisfaction in
full of the Debentures and upon exercise in full of the Warrant, Purchasers
shall promptly (but in any event within ten Business Days) send a Final
Payment Notice to the Trustee indicating that the Obligations (as defined in
the Trust) have been satisfied in full.
4.8 Conversion and Exercise Procedures. The form of exercise
----------------------------------
included in the Warrants and the form of Conversion/Exchange Notice included
in the Debentures set forth the totality of the procedures required of the
Purchasers in order to exercise the Warrants or convert/exchange the
Debentures. No additional legal opinion or other information or instructions
shall be required of the Purchasers to exercise their Warrants or
convert/exchange their Debentures. The Company shall honor exercises of the
Warrants and conversions/exchanges of the Debentures and shall deliver
Underlying Shares or DOC Shares in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.
-22-
Further, notwithstanding any breach or alleged breach by any Purchaser of
this Agreement or any other document executed in connection herewith or any
other claim it may have against any Purchaser, the Company agrees that it
shall timely honor conversions, exercises and exchanges by the Purchasers.
4.9 Future Financings. From the date hereof until 90 days after
-----------------
the Effective Date, other than as contemplated by this Agreement, neither
the Company nor any Subsidiary shall (a) incur, issue, create, guarantee,
assume or otherwise become liable on account of any indebtedness other than
with a federally regulated financial institution or (b) increase any amounts
owing or to which such Person is liable under any existing obligations or
(c) issue or sell any Capital Shares or Capital Shares Equivalents.
Notwithstanding anything herein to the contrary, the 90 day period set forth
in this Section 4.9 shall be extended for the number of Trading Days during
such period in which (y) trading in the Common Stock is suspended by any
Principal Market, or (z) following the Effective Date, the Registration
Statement is not effective or the prospectus included in the Registration
Statement may not be used by the Purchasers for the resale of the Underlying
Shares. Notwithstanding anything to the contrary herein, this Section 4.9
shall not apply to the following (each of which, an "Exempt Transaction"):
(a) the granting of options to employees, officers and directors of the
Company pursuant to any stock option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a majority
of the members of a committee of non-employee directors established for such
purpose, (b) the exercise of a Debenture or any other security issued by the
Company in connection with the offer and sale of this Company's securities
pursuant to this Agreement, or (c) the exercise of or conversion of any
Convertible Securities, options or warrants issued and outstanding on the
Closing Date, provided that such securities have not been amended since the
date hereof, or (d) acquisitions or strategic investments, the primary
purpose of which is not to raise capital, or (e) the lending or borrowing of
money between or among the Company and its direct or indirect subsidiaries
(including, for this purpose, DOC and InfoTechUSA, Inc. and each of their
subsidiaries), or (f) the potential [OMITTED FOR CONFIDENTIALITY], or (g) in
connection with the share issuances or re-pricing to certain former officers
as described in the Proxy, or (h) in a transaction involving the issuance of
Common Stock to satisfy a bona fide payable if less than $100,000 and if the
shares of Common Stock so issued are valued at or above the then market
price, or (i) any transaction involving the issuance of shares of Common
Stock or warrants to acquire Common Stock if in connection with the
settlement of bona fide litigation and if the shares so issued are valued at
or above the then market price and if the options, if any, have an exercise
price at or above the then market price.
4.10 Securities Laws Disclosure; Publicity. The Company shall, by
-------------------------------------
9:30 a.m. Eastern time on the Trading Day following the Closing Date, issue
a press release or file a Current Report on Form 8-K reasonably acceptable
to each Purchaser disclosing all material terms of the transactions
contemplated hereby. The Company and the Purchasers shall consult with each
other in issuing any press releases with respect to the transactions
contemplated hereby. Notwithstanding the foregoing, other than in any
registration statement filed pursuant to the Registration Rights Agreement
and filings related thereto, 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 Principal Market, without
the prior written consent of such Purchaser, except to the extent such
disclosure is required by law or Principal Market
-23-
regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure.
4.11 Non-Public Information. The Company covenants and agrees that
----------------------
other than as it relates to the Transaction Documents (including Section
4.16) neither it nor any other Person acting on its behalf will provide any
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto
such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
4.12 Use of Proceeds. The Company shall use the net proceeds from
---------------
the sale of the Securities hereunder for working capital purposes and for
the satisfaction of a portion of the Company's debt, but not to redeem any
Company equity or equity-equivalent securities. Prior to the receipt of
Shareholder Approval, the Company shall not declare or pay any cash dividend
on its shares of Common Stock while any Debentures remains outstanding.
4.13 Reimbursement. If any Purchaser becomes involved in any
-------------
capacity in any Proceeding by or against any Person who is a stockholder of
the Company, solely as a result of such Purchaser's acquisition of the
Securities under this Agreement and without causation by any other activity,
obligation, condition or liability pertaining to such Purchaser and not to
the transactions contemplated by this Agreement, the Company will reimburse
such Purchaser, to the extent such reimbursement is not provided for in
Section 4.14, for its reasonable legal and other expenses (including the
cost of any investigation, preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who
are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Purchasers and any such
Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees
or controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result
of acquiring the Securities under this Agreement.
4.14 Indemnification of Purchasers. Subject to the provisions of
-----------------------------
this Section 4.14, the Company will indemnify and hold the Purchasers and
their directors, officers, shareholders, partners, employees and agents
(each, a "Purchaser Party") harmless from any and all losses, liabilities,
---------------
obligations, claims, contingencies, damages, costs and expenses, including
all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to any breach of any of the
representations, warranties, covenants or agreements made by the Company in
this Agreement or in the other Transaction Documents. If any action shall be
brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly
notify the Company in writing, and the Company shall have
-24-
the right to assume the defense thereof with counsel of its own choosing.
Any Purchaser Party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or
(iii) in such action there is, in the reasonable opinion of such separate
counsel, a material conflict on any material issue between the position of
the Company and the position of such Purchaser Party. The Company will not
be liable to any Purchaser Party under this Agreement (i) for any settlement
by an Purchaser Party effected without the Company's prior written consent,
which shall not be unreasonably withheld or delayed; or (ii) to the extent,
but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party's breach of any of the representations,
warranties, covenants or agreements made by the Purchasers in this Agreement
or in the other Transaction Documents.
4.15 Shareholders Rights Plan. In the event that a shareholders
------------------------
rights plan is adopted by the Company, no claim will be made or enforced by
the Company or any other Person that any Purchaser is an "Acquiring Person"
under the plan or in any way could be deemed to trigger the provisions of
such plan by virtue of receiving Securities under the Transaction Documents.
4.16 Participation in Future Financing. From the date hereof until
---------------------------------
such time as a Purchaser no longer holds any Debentures, and except for
Exempt Transactions, the Company shall not effect a financing of its Capital
Shares or Capital Shares Equivalents (a "Subsequent Financing") unless (i)
--------------------
the Company delivers to Purchasers' Representative a written notice at least
5 Trading Days prior to the closing of such Subsequent Financing (the
"Subsequent Financing Notice") of its intention to effect such Subsequent
---------------------------
Financing, which Subsequent Financing Notice shall describe in reasonable
detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder, the Person with whom such
Subsequent Financing is proposed to be effected, and attached to which shall
be a term sheet or similar document relating thereto and (ii) Purchasers'
Representative shall not have notified the Company by 6:30 p.m. (New York
City time) on the fifth (5th) Trading Day after its receipt of the
Subsequent Financing Notice of its and/or other Purchasers' willingness to
provide (or to cause its designee to provide), subject to completion of
mutually acceptable documentation, all or part of such financing to the
Company on the same terms set forth in the Subsequent Financing Notice. If
one or more Purchasers shall fail to so notify the Company of their
willingness to participate in the Subsequent Financing, the Company may
effect the remaining portion of such Subsequent Financing on the terms and
to the Persons set forth in the Subsequent Financing Notice; provided that
the Company must provide the Purchasers with a second Subsequent Financing
Notice, and the Purchasers will again have the right of first refusal set
forth above in this Section 4.16, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason on the
terms set forth in such Subsequent Financing Notice within 60 Trading Days
after the date of the initial Subsequent Financing Notice with the Person
identified in the Subsequent Financing Notice, and if the Company still
desires to effect such financing. In the event the Company receives
responses to Subsequent Financing Notices from Purchasers seeking to
purchase more than the financing sought by the Company in the Subsequent
Financing such Purchasers shall have the right to purchase their Pro Rata
Portion (as defined below) of the Capital Shares or Capital Shares
Equivalents to be issued
-25-
in such Subsequent Financing. "Pro Rata Portion" is the ratio of (x) the
----------------
principal amount of Debentures purchased by a Purchaser and (y) the sum of
the aggregate principal amount of Debentures issued hereunder. If any
Purchaser no longer holds any Debentures, then the Pro Rata Portions shall
be re-allocated among the remaining Purchasers. Notwithstanding anything to
the contrary herein, this Section 4.16 shall not apply to the following (a)
the granting of options to employees, officers and directors of the Company
pursuant to any stock option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a majority
of the members of a committee of non-employee directors established for such
purpose, or (b) the exercise of the Debenture or any other security issued
by the Company in connection with the offer and sale of this Company's
securities pursuant to this Agreement, or (c) the exercise of or conversion
of any Convertible Securities, options or warrants issued and outstanding on
the Original Issue Date, provided such securities have not been amended
since the date hereof, or (d) acquisitions or strategic investments, the
primary purpose of which is not to raise capital, or (e) any other Exempt
Transaction.
4.17 Limit on Dividends. So long as any Debenture remains
------------------
outstanding, the Company shall not declare or pay any dividend on its Common
Stock in the form of cash or in the form of shares of DOC Common Stock.
ARTICLE V
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser,
-----------
by written notice to the other parties, if the First Closing has not been
consummated on or before July 3, 2003; provided that no such termination
will affect the right of any party to xxx for any breach by the other party
(or parties).
5.2 Fees and Expenses. The Company has agreed to reimburse $50,000
-----------------
to Midsummer Capital, LLC ("Midsummer") (of which $15,000 has been received)
---------
as reimbursement for its legal, administrative and due diligence fees and
expenses incurred to prepare and negotiate the Transaction Documents. On the
Closing Date, Midsummer Investment Ltd. shall reduce its Subscription Amount
by $35,000 as payment of the remaining portion of the $50,000 referenced
above. 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. The Purchasers shall pay, on
behalf of the Company, the fees of the placement agents for this transaction
out of closing proceeds, in the aggregate amount of $430,000.
5.3 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.
-26-
5.4 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 (a) the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that is
not a Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, or (c) the Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service. The addresses for
such notices and communications are those set forth on the signature pages
hereof, or such other address as may be designated in writing hereafter, in
the same manner, by such Person.
5.5 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.
5.6 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.
5.7 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.
Notwithstanding anything herein to the contrary, the Company may, without
notice or other action, effect the reincorporation of the Company from
Missouri to Florida, all as set forth in the Proxy. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.
5.8 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 as otherwise set forth in
Sections 4.12.
5.9 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 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
-27-
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction
Documents), 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 or inconvenient venue for such proceeding. Each party 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. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10 Survival. The representations, warranties, agreements and
--------
covenants contained herein shall survive the Closings and the delivery,
exercise and/or conversion of the Securities, as applicable, for the
applicable statute of limitations.
5.11 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) with the same force and effect as if such
facsimile signature page were an original thereof.
5.12 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.
5.13 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, provided, however, in the case of a
rescission of a conversion of a Debenture or exercise of a Warrant, the
Purchaser shall be required to return any shares of Common Stock subject to
any such conversion or exercise notice.
-28-
5.14 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.
5.15 Remedies. In addition to being entitled to exercise all rights
--------
provided herein or granted by law, including recovery of 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. Without limiting the
generality of the foregoing, the Company expressly agrees that its breach of
the next-to-last last sentence of Section 4.7 would cause each Purchaser
irreparable harm, and consents to the granting of injunctive relief by any
court having jurisdiction to preclude any such issuance of securities.
5.16 Payment Set Aside. To the extent that the Company makes a
-----------------
payment or payments to any Purchaser pursuant to any Transaction Document or
a Purchaser enforces or exercises its rights 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, 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.
5.17 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 applicable to the
-29-
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.
5.18 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. 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. Except as expressly set forth herein with
respect to the Purchasers' Representative, whose duties as to the Company's
and DOC's equity are purely ministerial, and whose discretionary duties
relate solely to the Purchasers status as secured creditors of the Company,
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 has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Purchasers and
their respective counsel have chosen to communicate with the Company through
FW. FW does not represent all of the Purchasers but only Midsummer. The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.
5.19 Liquidated Damages. The Company's obligations to pay any
------------------
liquidated damages or other amounts owing under the Transaction Documents is
a continuing obligation of the Company and shall not terminate until all
unpaid liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such liquidated
damages or other amounts are due and payable shall have been canceled.
***********************
-30-
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.
APPLIED DIGITAL SOLUTIONS, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: CEO
Address for Notice:
------------------
000 Xxxxx Xxxx Xxx
Xxxxx 000
Xxxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx, CEO
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Holland & Knight LLP
Attn: Xxxxxx Xxxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
-31-
PURCHASERS SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
XXXXXXX ASSOCIATES, L.P. Address for Notice:
------------------
By: /s/ Xxxx Xxxxxx Tel:
------------------------------------- Fax:
Xxxx Xxxxxx, General Partner Attn:
Taxpayer ID#
Subscription Amount: $1,400,000
XXXXXXX INTERNATIONAL, L.P. Address for Notice:
By: Xxxxxxx International Capital Advisors Inc., ------------------
as Attorney-in-Fact
By: /s/ Xxxx Xxxxxx Tel:
------------------------------------- Fax:
Xxxx Xxxxxx, President Attn:
Taxpayer ID#
Subscription Amount: $2,100,000
-32-
PURCHASERS SIGNATURE PAGE (CONT. . . )
MIDSUMMER INVESTMENT, LTD. Address for Notice:
------------------
c/o Midsummer Capital, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
By: /s/ Xxxxx Xxxxxxx Tel: (000) 000-0000
------------------------------------- Fax: (000) 000-0000
Xxxxx Xxxxxxx, Authorized Signatory Attn: Xxxxx Xxxxxxx
Taxpayer ID#
Subscription Amount: $2,000,000
With a copy to:
--------------
Xxxxxxx Xxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx
Tel: (000) 000-0000
Fax: 212) 000-0000
-33-
PURCHASERS SIGNATURE PAGE (CONT. . . )
OMICRON MASTER TRUST Address for Notice:
By: Omicron Capital L.P., as advisor ------------------
By: Omicron Capital Inc., its general partner c/o Omicron Capital L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx
By: /s/ Xxxxx Xxxxxxxxx Fax: (000) 000-0000
------------------------------------------
Xxxxx Xxxxxxxxx, President
Taxpayer ID#:
Subscription Amount: $1,500,000
-34-
PURCHASERS SIGNATURE PAGE (CONT. . . )
ISLANDIA, L.P. Address for Notice:
-------------------
c/o Xxxx Xxxx, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
By: /s/ Xxxxxxx Xxxxxx Tel: (000) 000-0000
------------------------------------- Fax: (000) 000-0000
Name: Xxxxxxx Xxxxxx
Title: President of Xxxx Xxxx, Inc.,
General Partner
Taxpayer ID#:
Subscription Amount: $2,000,000
-35-
PURCHASERS SIGNATURE PAGE (CONT. . . )
PORTSIDE GROWTH AND OPPORTUNITY FUND
By: /s/ Xxxxxxx X. Xxxxxxx Address for Notice:
---------------------------------- ------------------
Name: Xxxxxxx X. Xxxxxxx c/o Ramius Capital Group, LLC
Title: Authorized Signatory 000 Xxxxx Xxx., 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Taxpayer ID#:
Subscription Amount: $1,500,000
-36-
