SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): August 11, 1998
VISUAL DATA CORPORATION.
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(Exact name of registrant as specified in its charter)
FLORIDA 0-22948 65-0420146
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
1291 SW 29 Avenue, Pompano Beach, Florida 33069
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(Address of executive offices and Zip Code)
Registrant's telephone number, including area code: (954)917-6655
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On August 11, 1998 Visual Data Corporation (the "Company") completed
the sale of 150 shares of the Company's Series A-1 Convertible Preferred Stock
(the "Preferred Stock"). The initial purchase resulted in gross proceeds to the
Company of $750,000. The placement was between the Company and one (1)
institutional investor. The Preferred Stock bears interest at 5% per annum,
payable upon conversion of the Preferred Stock, and is payable in kind at the
Company's option. The Preferred Stock is convertible into the Company's Common
Stock at a price equal to the lesser of (i) $3.0428 per share, or (ii) a
floating conversion price determined by multiplying a Conversion Percentage in
effect as of such date by the Market Price for the Company's Common Stock. The
Conversion Percentage shall be 87.76% for the first 180 days from the issuance
date of the Preferred Stock and 82.76% for any day thereafter. The Market Price
for the Company's Common Stock shall be the average of the three lowest closing
bid prices for such Common Stock during the twenty (20) consecutive trading days
immediately preceding such date. In no event shall any holder of Series A-1
Preferred be entitled to convert shares in excess of the number of shares of
Series A-1 Preferred which, upon conversion, would cause the aggregate number of
shares of Common Stock beneficially owned by such holder and its affiliates to
exceed 4.99% of the outstanding shares of Common Stock following such
conversion.
Under the terms of the Securities Purchase Agreement, the Company is
obligated to prepare and file a registration statement on Form S-3 providing for
the resale of the shares of Common Stock issuable upon conversion of the
Preferred Stock. The Company shall use its best efforts to have such
registration statement declared effective by September 30, 1998, provided that
if the Securities and Exchange Commission reviews the registration statement on
Form S-3 and in connection with such review request the audited financial
statements of the Company's year ending September 30, 1998, in order to declare
such registration effective, the deadline shall be extended to October 30,
1998). In the event such registration statement is not declared effective by
such date, both the fixed conversion price and the variable conversion price
would be reduced by two (2) percent and would be further reduced by an
additional .06 percent for each calendar day thereafter until such registration
statement has been declared effective up to a maximum of 20%.
The above discussion is qualified in its entirety by reference to the
agreements which are filed with this report on Form 8-K.
Item 7. Financial Statements, Proforma Financial Information and
Exhibits.
(c) Exhibits.
No. Description
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3 Articles of Amendment to the Articles of Incorporation setting
forth the
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designations, rights and preferences of the Series A-1
Convertible Preferred Stock
4 Form of Warrant to Purchase Common Stock
10.1 Securities Purchase Agreement
10.2 Registration Rights Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Visual Data Corporation
Date: August 21, 1998 By: /s/ Randy S. Selman
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Randy S. Selman,
President, Chief Executive Officer
and Acting Chief Financial Officer
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EXHIBIT 3
ARTICLES OF AMENDMENT
to
ARTICLES OF INCORPORATION
of
VISUAL DATA CORPORATION
(Pursuant to Sections 607.1006 and 607.0602 of the
Florida Business Corporation Act)
Visual Data Corporation, a corporation organized and existing under the
Florida Business Corporation Act (the "Corporation") bearing Document Number
P93000035279, hereby certifies that the following resolutions were adopted by
the Board of Directors of the Corporation on August 7, 1998 pursuant to the
authority of the Board of Directors:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the "Board")
in accordance with the provisions of its Articles of Incorporation, the Board of
Directors hereby authorizes a series of the Corporation's previously authorized
Preferred Stock (the "Preferred Stock"), and hereby amends Article IV of the
Articles of Incorporation to include the following:
The following shall be added to Article IV of the Corporation's
Articles of Incorporation, and shall be inserted at the end of such Article:
ARTICLE IV
Series A-1 Convertible Preferred Stock:
Terms which are defined in this Section of Article IV which relates to
the Series A-1 Convertible Preferred Stock of the Company (the "Series A-1
Section") shall have the respective meanings ascribed to the in this Series A-1
Section and not the meanings ascribed to them in the Series A Section (as
defined below). Terms utilized in the Section of Article IV which relates to the
Series A Convertible Preferred Stock of the Company (the "Series A Section")
shall have the respective meanings ascribed to them in the Series A Section and
not the meanings ascribed to them in this Series A-1 Section.
1. Designation, Amount and Dividends. The designation of this
series, which consists of 150 shares of Preferred Stock, is the Series
A-1 Convertible Preferred Stock (the "Preferred Shares") and the stated
value shall be Five Thousand Dollars ($5,000.00) per share (the "Stated
Value"). The Preferred Shares shall not bear any dividends.
Roxanne K. Beilly, Esq., FL Bar #851450
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301 Phone No: (954) 763-1200
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2. Holder's Conversion of Preferred Shares. A holder of
Preferred Shares shall have the right, at such holder's option, to
convert the Preferred Shares into shares of the Company's common stock,
no par value per share (the "Common Stock"), on the following terms and
conditions:
a. Conversion Right. Subject to the provisions of
Sections 12 and 2(j) below, at any time or times, any holder of
Preferred Shares shall be entitled to convert any whole number of
Preferred Shares into fully paid and nonassessable shares (rounded to
the nearest whole share in accordance with Section 2(i) below) of
Common Stock, at the Conversion Rate (as defined below); provided,
however, that in no event shall any holder be entitled to convert
Preferred Shares in excess of that number of Preferred Shares which,
upon giving effect to such conversion, would cause the aggregate number
of shares of Common Stock beneficially owned by the holder and its
affiliates to exceed 4.99% of the outstanding shares of the Common
Stock following such conversion. For purposes of the foregoing proviso,
the aggregate number of shares of Common Stock beneficially owned by
the holder and its affiliates shall include the number of shares of
Common Stock issuable upon conversion of the Preferred Shares with
respect to which the determination of such proviso is being made, but
shall exclude the number of shares of Common Stock which would be
issuable upon (i) conversion of the remaining, nonconverted Preferred
Shares beneficially owned by the holder and its affiliates and (ii)
exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company subject to a limitation on conversion
or exercise analogous to the limitation contained herein beneficially
owned by the holder and its affiliates. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. Each holder may waive the
foregoing limitations with respect to its conversions by written notice
to the Company upon not less than 61 days prior notice (with such
waiver taking effect only upon the expiration of such 61 day notice
period).
b. Conversion Rate. The number of shares of Common
Stock issuable upon conversion of each of the Preferred Shares pursuant
to Sections (2)(a) and 2(h) shall be determined according to the
following formula (the "Conversion Rate"):
(.05)(N/365)(5,000) + 5,000
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Conversion Price
For purposes of these Articles of Amendment, the following terms shall
have the following meanings:
(i) "Conversion Price" means, as of any
Conversion Date (as defined below) or other date of determination, the lower of
the Fixed Conversion Price and the Floating Conversion Price, each in effect as
of such date and subject to adjustment as provided herein;
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(ii) "Fixed Conversion Price" means $3.1625,
subject to adjustment as provided herein;
(iii) "Floating Conversion Price" means, as
of any date of determination, the amount obtained by multiplying the Conversion
Percentage in effect as of such date by the Market Price for the Common Stock,
subject to adjustment as provided herein;
(iv) "Conversion Percentage" means (A)
during the period beginning on the Issuance Date of the relevant Preferred
Shares and ending on November 3, 1998, 90%, and (B) on and after November 3,
1998, 85%; subject in each case to adjustment as provided herein;
(v) "Market Price" means, with respect to
any security for any date, the average of the three lowest Closing Bid Prices
for such security during the twenty (20) consecutive trading days immediately
preceding such date;
(vi) "Closing Bid Price" means, for any
security as of any date, the last closing bid price for such security on the
Nasdaq SmallCap Market as reported by Bloomberg Financial Markets ("Bloomberg"),
or, if the Nasdaq SmallCap Market is not the principal trading market for such
security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the last closing trade price of such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the holders of a majority of the outstanding Preferred
Shares. If the Company and the holders of Preferred Shares are unable to agree
upon the fair market value of the Common Stock, then such dispute shall be
resolved pursuant to Section 2(g)(iii) below with the term "Closing Bid Price"
being substituted for the term "Market Price." (All such determinations to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period).
(vii) "N" means the number of days from, but
excluding, the Issuance Date through and including the Conversion Date for the
Preferred Shares for which conversion is being elected; and
(viii) "Issuance Date" means, with respect
to each Preferred Share, the date of issuance of the applicable Preferred Share.
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c. Effect of Failure to Obtain and Maintain
Effectiveness of Registration Statement. If the registration statement (the
"Registration Statement") covering the resale of all of the shares of Common
Stock issuable upon conversion or exercise of the Preferred Shares (as defined
in the Securities Purchase Agreement), respectively, and required to be filed by
the Company pursuant to the Registration Rights Agreement between the Company
and the Buyers referred to therein (the "Registration Rights Agreement") is not
(i) filed by the Filing Deadline (as defined in the Registration Rights
Agreement) (the "Scheduled Filing Date"), (ii) declared effective by the SEC on
or before the Effectiveness Deadline (as defined in the Registration Rights
Agreement (the "Scheduled Effective Date"), except where the failure to meet
such deadline is the result solely of actions by the holders of Registrable
Securities (as defined in the Registration Rights Agreement), or (iii) if after
the Registration Statement has been declared effective by the SEC, sales of all
such shares of Common Stock cannot be made pursuant to the Registration
Statement (whether because of a failure to keep the Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to the Registration Statement, to register sufficient shares of Common
Stock or otherwise), then, as partial relief for the damages to any holder by
reason of any such delay in or reduction of its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Conversion Percentage and the Fixed
Conversion Price shall be adjusted as follows:
(I) Conversion Percentage. The Conversion
Percentage in effect at such time shall be reduced by a number of percentage
points equal to the sum of (x) 2 and (y) the product of (I) .06 and (II) the sum
of (i) the number of days after the Scheduled Filing Date that the relevant
Registration Statement is not filed with the SEC, (which number of days shall
not include days for which the sole reason that the relevant Registration
Statement was not filed was because of actions by holders of Registrable
Securities), (ii) the number of days after the Scheduled Effective Date that the
relevant Registration Statement is not declared effective by the SEC, and (iii)
the number of days (excluding days during an Allowable Grace Period (as defined
in the Registration Rights Agreement)) that sales cannot be made pursuant to the
Registration Statement in accordance with the Registration Statement after the
Registration Statement has been declared effective (which number of days shall
not include days for which the sole reason that sales cannot be made is because
of actions by holders of Registrable Securities, (the sum of such number of days
referred to in clauses (i), (ii) and (iii) of this Section c.(I) being
collectively referred to as the "Registration Statement Default Days"); and
(II) Fixed Conversion Price. The Fixed
Conversion Price in effect at such time shall be reduced by an amount equal to
the sum of (x) the product of .02 and the Fixed Conversion Price in effect as of
the Issuance Date and (y) the product of (I) the Fixed Conversion Price in
effect as of the Issuance Date and (II) .0006 multiplied by the number of
Registration Statement Default Days.
Notwithstanding the foregoing, in no event shall the Conversion Percentage be
reduced pursuant to Section 2(c)(A) above by a number of percentage points which
in the aggregate exceeds 20 nor shall
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the Fixed Conversion Price be reduced pursuant to Section 2(c)(B) above by an
amount which in the aggregate exceeds the product of .20 and the Fixed
Conversion Price in effect as of the Issuance Date.
d. Adjustment to Conversion Price -- Dilution and
Other Events. In order to prevent dilution of the rights granted under these
Articles of Amendment, the Conversion Price will be subject to adjustment from
time to time as provided in this Section 2(d).
(i) Adjustment of Fixed Conversion Price
upon Issuance of Common Stock. If and whenever on or after the date of issuance
of the Preferred Shares, the Company issues or sells, or is deemed to have
issued or sold, any shares of Common Stock (other than shares of Common Stock
deemed to have been issued by the Company in connection with Approved Issuances
(as defined below)) for a consideration per share less than the Market Price in
effect immediately prior to such time (the "Applicable Price"), then immediately
after such issue or sale, the Fixed Conversion Price shall be reduced to an
amount equal to the product of (x) the Fixed Conversion Price in effect
immediately prior to such issue or sale and (y) the quotient determined by
dividing (1) the sum of (I) the product of the Applicable Price and the number
of shares of Common Stock Deemed Outstanding (as defined below) immediately
prior to such issue or sale, and (II) the consideration, if any, received by the
Company upon such issue or sale, by (2) the product of (I) the Applicable Price
and (II) the number of shares of Common Stock Deemed Outstanding immediately
after such issue or sale. For purposes of determining the adjusted Fixed
Conversion Price under this Section 2(d)(i), the following shall be applicable:
(A) Issuance of Options. If the
Company in any manner grants any rights or options to subscribe for or
to purchase Common Stock (other than in connection with an Approved
Issuance or upon conversion of the Preferred Shares) or any stock or
other securities convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon conversion
or exchange of such Convertible Securities is less than the Applicable
Price, then the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For
purposes of this Section 2(d)(i)(A), the "price per share for which
Common Stock is issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities" is determined by
dividing (I) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus in the case of such
Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the Company upon
the issuance or sale of such Convertible Securities and the conversion
or exchange thereof, by (II) the total maximum
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number of shares of Common Stock issuable upon exercise of such Options
or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. No adjustment of the Fixed
Conversion Price shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(B) Issuance of Convertible
Securities. If the Company in any manner issues or sells any
Convertible Securities (other than in connection with an Approved
Issuance or upon conversion of the Preferred Shares) and the price per
share for which Common Stock is issuable upon such conversion or
exchange is less than the Applicable Price, then the maximum number of
shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For the
purposes of this Section 2(d)(i)(B), the "price per share for which
Common Stock is issuable upon such conversion or exchange" is
determined by dividing (I) the total amount received or receivable by
the Company as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (II) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities. No adjustment of the Fixed Conversion Price shall be made
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of the Fixed Conversion Price had been or are to be made
pursuant to other provisions of this Section 2(d)(i), no further
adjustment of the Fixed Conversion Price shall be made by reason of
such issue or sale.
(C) Change in Option Price or Rate
of Conversion. If the purchase price provided for in any Options, the
additional consideration, if any, payable upon the issue, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock change at any time, the Fixed Conversion Price in effect at the
time of such change shall be readjusted to the Fixed Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold;
provided that no adjustment shall be made if such adjustment would
result in an increase of the Fixed Conversion Price then in effect.
(D) Certain Definitions. For
purposes of determining the adjusted Fixed Conversion Price under this
Section 2(d)(i), the following terms have meanings set forth below:
(I) "Approved Issuances" shall mean
(i) a loan
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from a commercial bank (not having any equity feature), (ii) any
transaction involving the Company's issuances of securities (A) as
consideration in a merger or consolidation or (B) as consideration for
the acquisition of a business, product or license or other assets by
the Company, (iii) the issuance of Common Stock in a firm commitment,
underwritten public offering, (iv) the issuance of securities upon
exercise or conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof, (v) the
issuance of securities under existing agreements of the Company listed
on Schedule 4(g) of the Securities Purchase Agreement between the
Company and the initial holders of the Preferred Shares (the
"Securities Purchase Agreement") or (vi) the grant of additional
options or warrants, or the issuance of additional securities, under
any Company stock option plan, restricted stock plan, stock purchase
plan or other plan or written compensation contract for the benefit of
the Company's employees or directors.
(II) "Common Stock Deemed
Outstanding" means, at any given time, the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of
Common Stock deemed to be outstanding pursuant to Sections 2(d)(i)(A)
and 2(d)(i)(B) hereof regardless of whether the Options or Convertible
Securities are actually exercisable at such time, but excluding any
shares of Common Stock issuable upon conversion of the Preferred
Shares.
(E) Treatment of Expired Options and
Unexercised Convertible Securities. If, in any case, the total number
of shares of Common Stock issuable upon the exercise of any Option or
upon exercise, conversion or exchange of any Convertible Security is
not, in fact, issued and the rights to exercise such Option or to
exercise, convert or exchange such Convertible Securities shall have
expired or terminated, the Fixed Conversion Price then in effect will
be readjusted to the Fixed Conversion Price which would have been
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination (other than in respect of the actual
number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(F) Effect on Fixed Conversion Price
of Certain Events. For purposes of determining the adjusted Fixed
Conversion Price under this Section 2(d)(i), the following shall be
applicable:
(I) Calculation of
Consideration Received. If any Common Stock, Options or Convertible
Securities are issued or sold or deemed to have been issued or sold for
cash, the consideration received therefor will be deemed to be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable
expenses paid or incurred by the Company in connection with such
issuance or sale. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company
will be the fair value of such
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consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will
be the Market Price of such security on the date of receipt. In case
any Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in
which the Company is the surviving entity the amount of consideration
therefor will be deemed to be the fair value of such portion of the net
assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may
be. The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the holders of a majority
of the Preferred Shares then outstanding. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined within forty-eight (48) hours of the
tenth (10th) day following the Valuation Event by an independent,
reputable appraiser selected by the Company. The determination of such
appraiser shall be deemed binding upon all parties absent manifest
error.
(II) Integrated
Transactions. In case any Option is issued in connection with the issue
or sale of other securities of the Company, together comprising one
integrated transaction in which no specific consideration is allocated
to such Options by the parties thereto, the Options will be deemed to
have been issued for a consideration of $.01.
(III) Treasury Shares. The
number of shares of Common Stock outstanding at any given time does not
include shares owned or held by or for the account of the Company, and
the disposition of any shares so owned or held will be considered an
issue or sale of Common Stock.
(IV) Record Date. If the
Company takes a record of the holders of Common Stock for the purpose
of entitling them (1) to receive a dividend or other distribution
payable in Common Stock, Options or in Convertible Securities or (2) to
subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(ii) Adjustment of Fixed Conversion Price
upon Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common
Stock into a greater number of shares, the Fixed Conversion Price in
effect immediately prior to such subdivision will be proportionately
reduced. If the Company at any time combines (by combination, reverse
stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Fixed Conversion
Price in effect immediately prior to such combination will be
proportionately increased.
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(iii) Adjustment of Floating Conversion
Price upon Issuance of Convertible Securities. If the Company in any
manner issues or sells Convertible Securities that are convertible into
Common Stock at a price which varies with the market price of the
Common Stock (the formulation for such variable price being herein
referred to as, the "Variable Price") and such Variable Price is not
calculated using the same formula used to calculate the Floating
Conversion Price in effect immediately prior to the time of such issue
or sale, the Company shall provide written notice thereof via facsimile
and overnight courier to each holder of the Preferred Shares ("Variable
Notice") on the date of issuance of such Convertible Securities. If the
holders of Preferred Shares representing at least two-thirds (2/3) of
the Preferred Shares then outstanding provide written notice via
facsimile and overnight courier (the "Variable Price Election Notice")
to the Company within five (5) business days of receiving a Variable
Notice that such holders desire to replace the Floating Conversion
Price then in effect with the Variable Price described in such Variable
Notice, the Company shall prepare and deliver to each holder of the
Preferred Shares via facsimile and overnight courier a copy of an
amendment to these Articles of Amendment (the "Variable Price
Amendment") that substitutes the Variable Price for the Floating
Conversion Price (together with such modifications to these Articles of
Amendment as may be required to give full effect to the substitution of
the Variable Price for the Floating Conversion Price) within five (5)
business days after receipt of the requisite number of Variable Price
Election Notices set forth above. The Company shall file such Variable
Price Amendment with the Secretary of State of the State of Florida
within five (5) business days after delivery of the Variable Price
Amendment to the holders of the Preferred Shares; provided that in the
event that the Company receives a notice prior to the filing of the
Variable Price Amendment from any holder who has delivered a Variable
Price Election Notice in connection with such Variable Price Amendment
that such holder objects to the form of the Variable Price Amendment,
the Company shall not file such Variable Price Amendment until such
time as the Variable Price Amendment has been revised to the reasonable
satisfaction of such holder and approved in writing by the holders of
the Preferred Shares representing at least two-thirds (2/3) of the
Preferred Shares then outstanding. Except as provided in the preceding
proviso, a holder's delivery of a Variable Price Election Notice shall
serve as the consent required to amend these Articles of Amendment
pursuant to Section 13 below.
(iv) Reorganization, Reclassification,
Consolidation, Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially
all of the Company's assets to another Person (as defined below) or
other transaction which is effected in such a way that holders of
Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or
in exchange for Common Stock is referred to herein as "Organic Change."
Prior to the consummation of any Organic Change, the Company will make
appropriate provision (in form and substance reasonably satisfactory to
the holders of a majority of the Preferred Shares then outstanding) to
insure that each of the holders of the Preferred Shares will
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thereafter have the right to acquire and receive in lieu of or in
addition to (as the case may be) the shares of Common Stock otherwise
acquirable and receivable upon the conversion of such holder's
Preferred Shares, such shares of stock, securities or assets that would
have been issued or payable in such Organic Change with respect to or
in exchange for the number of shares of Common Stock which would have
been acquirable and receivable upon the conversion of such holder's
Preferred Shares had such Organic Change not taken place (without
taking into account any limitations or restrictions on the timing or
amount of conversions). In any such case, the Company will make
appropriate provision (in form and substance reasonably satisfactory to
the holders of a majority of the Preferred Shares then outstanding)
with respect to such holders' rights and interests to insure that the
provisions of this Section 2(d) and Section 2(e) below will thereafter
be applicable to the Preferred Shares (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of
the Fixed Conversion Price to the value for the Common Stock reflected
by the terms of such consolidation, merger or sale, if the value so
reflected is less than the Fixed Conversion Price in effect immediately
prior to such consolidation, merger or sale and an immediate revision
to the Floating Conversion Price to reflect the price of the common
stock of the surviving entity and the market in which such common stock
is traded). The Company will not effect any such consolidation, merger
or sale, unless prior to the consummation thereof, the successor entity
(if other than the Company) resulting from consolidation or merger or
the entity purchasing such assets assumes, by written instrument (in
form and substance reasonably satisfactory to the holders of a majority
of the Preferred Shares then outstanding), the obligation to deliver to
each holder of Preferred Shares such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may
be entitled to acquire. "Person" shall mean an individual, a limited
liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any
department or agency thereof.
(v) Certain Events. If any event occurs of
the type contemplated by the provisions of this Section 2(d) but not
expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company's Board
of Directors will make an appropriate adjustment in the Conversion
Price so as to protect the rights of the holders of the Preferred
Shares; provided that no such adjustment will increase the Conversion
Price as otherwise determined pursuant to this Section 2(d). The good
faith determination of the Board of Directors regarding the appropriate
adjustment pursuant to this Section 2(d)(v) shall be binding on the
holders of the Preferred Shares.
(vi) Notices.
(A) Immediately upon any adjustment
of the Conversion Price, the Company will give written notice thereof
to each holder of Preferred Shares, setting forth in reasonable detail
and certifying the calculation of such adjustment.
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(B) The Company will give written
notice to each holder of Preferred Shares at least fifteen (15) days
prior to the date on which the Company closes its books or takes a
record (I) with respect to any dividend or distribution upon the Common
Stock, (II) with respect to any pro rata subscription offer to holders
of Common Stock or (III) for determining rights to vote with respect to
any Organic Change, dissolution or liquidation and in no event shall
such notice be provided to such holder prior to such information being
made known to the public.
(C) The Company will also give
written notice to each holder of Preferred Shares at least fifteen (15)
days prior to the date on which any Organic Change, dissolution or
liquidation will take place and in no event shall such notice be
provided to such holder prior to such information being made known to
the public.
e. Purchase Rights. In addition to any adjustments of
the Conversion Price pursuant to Section 2(d) above, if at any time after the
Issuance Date the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the "Purchase
Rights"), then the holders of Preferred Shares will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock acquirable upon complete conversion of the Preferred
Shares (without taking into account any limitations or restrictions on the
timing or amount of conversions) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
f. Fixing of Conversion Price - Major Corporate Event
Announcement. Notwithstanding anything contained in Section 2(b) above, in the
event (i) the Company makes a public announcement that it intends to consolidate
or merge with or into another Person or engage in a business combination
involving the issuance or exchange of 30% or more of the Company's outstanding
Common Stock, other than pursuant to an Exempt Major Transaction (as defined in
Section 3(c)(i) below) (ii) the Company makes a public announcement that it
intends to sell or transfer substantially all of the Company's assets, or (iii)
any person, group or entity (including the Company) publicly announces a
purchase, tender or exchange offer for 50% or more of the Company's outstanding
Common Stock (the transactions described in clauses (i), (ii) and (iii) above
are hereinafter referred to as "Major Corporate Events" and the date of the
announcement referred to in clause (i), (ii) or (iii) is hereinafter referred to
as the "Announcement Date"), then the Fixed Conversion Price shall, effective
upon the Announcement Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal to the Conversion Price which
would have been applicable for a conversion by the holder pursuant to Section
2(a) occurring on the Announcement Date. From and after the Adjusted Conversion
Price Termination Date, the Conversion Price shall be determined as set forth in
Section 2(a). For purposes hereof, "Adjusted Conversion Price Termination Date"
shall mean, with respect to any proposed Major Corporate
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Event for which a public announcement as contemplated by this Section 2(f) has
been made, the date upon which the Company or the person, group or entity (in
the case of clause (iii) above) publicly announces the consummation, termination
or abandonment of the proposed Major Corporate Event which was the subject of
the previous public announcement.
g. Mechanics of Conversion. Subject to the Company's
inability to fully satisfy its obligations under a Conversion Notice (as defined
below) as provided for in Section 4 below:
(i) Holder's Delivery Requirements. To
convert Preferred Shares into full shares of Common Stock on any date
(the "Conversion Date"), the holder thereof shall (A) transmit by
facsimile (or otherwise deliver), for receipt on or prior to 11:59
p.m., Eastern Time on such date, a copy of a fully executed notice of
conversion as described in Section 19 (the "Conversion Notice"), to the
Company, and (B) surrender to a common carrier for delivery to the
Company as soon as practicable following such date, the original
certificates representing the Preferred Shares being converted (or an
indemnification undertaking with respect to such shares in the case of
their loss, theft or destruction) (the "Preferred Stock Certificates")
and the originally executed Conversion Notice.
(ii) Company's Response. Upon receipt by the
Company of a facsimile copy of a Conversion Notice, the Company shall
promptly, but in no event later than the next business day, send, via
facsimile, a confirmation of receipt of such Conversion Notice to such
holder. Upon receipt by the Company of the Preferred Stock Certificates
to be converted pursuant to a Conversion Notice, together with the
originally executed Conversion Notice, the Company or its designated
transfer agent (the "Transfer Agent") (as applicable) shall, at the
sole option of the holder of such Preferred Stock, on the next business
day following the date of receipt of both (or the second business day
following the date of receipt of both if received after 11:00 a.m.
local time of the Company), either (I) issue and surrender to a common
carrier for overnight delivery to the address as specified in the
Conversion Notice, a certificate, registered in the name of the holder
or its designee, for the number of shares of Common Stock to which the
holder shall be entitled, or (II) credit such aggregate number of
shares of Common Stock to which the holder shall be entitled to the
holder's or its designee's balance account with The Depository Trust
Company. If the number of Preferred Shares represented by the Preferred
Stock Certificate(s) submitted for conversion is greater than the
number of Preferred Shares being converted, then the Company shall, as
soon as practicable and in no event later than two business days after
receipt of the Preferred Stock Certificate(s) and at its own expense,
issue and deliver to the holder a new Preferred Stock Certificate
representing the number of Preferred Shares not converted.
(iii) Dispute Resolution. In the case of a
dispute as to the determination of the Market Price or the arithmetic
calculation of the Conversion Rate, the Company shall promptly issue to
the holder the number of shares of Common Stock that is
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not disputed and shall submit the disputed determinations or arithmetic
calculations to the holder via facsimile as soon as possible, but in no
event later than two (2) business days after receipt of such holder's
Conversion Notice. If such holder and the Company are unable to agree
upon the determination of the Market Price or arithmetic calculation of
the Conversion Rate within one (1) business day of such disputed
determination or arithmetic calculation being submitted to the holder,
then the Company shall within one (1) business day submit via facsimile
(A) the disputed determination of the Market Price to an independent,
reputable investment bank or (B) the disputed arithmetic calculation of
the Conversion Rate to its independent, outside accountant. The Company
shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company
and the holder of the results no later than forty-eight (48) hours from
the time it receives the disputed determinations or calculations. Such
investment bank's or accountant's determination or calculation, as the
case may be, shall be binding upon all parties absent manifest error.
The period of time in which the Company is required to effect
conversions or redemptions under these Articles of Amendment shall be
tolled with respect to the subject conversion or redemption pending
resolution of any dispute by the Company made in good faith and in
accordance with this Section 2(g)(iii).
(iv) Record Holder. The person or persons
entitled to receive the shares of Common Stock issuable upon a
conversion of Preferred Shares shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the
Conversion Date.
(v) Company's Failure to Timely Convert. If
within five (5) business days of the Company's receipt of the Preferred
Stock Certificates to be converted and the Conversion Notice (the
"Share Delivery Period") the Company shall fail to issue a certificate
to a holder or credit the holder's balance account with The Depository
Trust Company for the number of shares of Common Stock to which such
holder is entitled upon such holder's conversion of Preferred Shares or
to issue a new Preferred Stock Certificate representing the number of
Preferred Shares to which such holder is entitled pursuant to Section
2(g)(ii) (a "Conversion Failure"), in addition to all other available
remedies which such holder may pursue hereunder and under the
Securities Purchase Agreement (including indemnification pursuant to
Section 8 thereof), the Company shall pay additional damages to such
holder on each date after such fifth (5th) business day that such
conversion is not timely effected in an amount equal 0.5% of the
product of (A) the sum of the number of shares of Common Stock not
issued to the holder on a timely basis pursuant to Section 2(g)(ii) and
to which such holder is entitled and, in the event the Company has
failed to deliver a Preferred Stock Certificate to the holder on a
timely basis pursuant to Section 2(g)(ii), the number of shares of
Common Stock issuable upon conversion of the Preferred Shares
represented by such Preferred Stock Certificate, as of the last
possible date which the Company could have issued such Preferred Stock
Certificate to such holder without violating Section 2(g) (ii), and (B)
the Closing Bid Price of the Common Stock on the last possible date
which the Company could have issued such Common Stock and such
Preferred Stock
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Certificate, as the case may be, to such holder without violating
Section 2(g)(ii). In addition to the foregoing, if for any reason a
holder has not received all of the shares of Common Stock prior to the
tenth (10th) business day after the expiration of the Share Delivery
Period with respect to a conversion of Preferred Shares, then the Fixed
Conversion Price in respect of any Preferred Shares held by such holder
(including Preferred Shares submitted for conversion, but for which
shares of Common Stock have not been issued to such holder) shall
thereafter be the lesser of (i) the Fixed Conversion Price on the
Conversion Date specified in the Conversion Notice which resulted in a
Conversion Failure and (ii) the lowest Conversion Price in effect
during the period beginning on, and including, such Conversion Date
through and including the day such shares of Common Stock are delivered
to the holder. The Fixed Conversion Price shall thereafter be subject
to further adjustment for any other events described in this Section 2.
If the Company fails to pay the additional damages set forth in this
Section 2(g)(v) within five business days of the date incurred, then
the holder entitled to such payments shall have the right at any time,
so long as the Company continues to fail to make such payments, to
require the Company, upon written notice, to immediately issue, in lieu
of the cash additional damages set forth in this Section 2(g)(v), the
number of shares of Common Stock equal to the quotient of (X) the
aggregate amount of the additional damages payments described above
divided by (Y) the Conversion Price in effect on such Conversion Date
as is specified by the holder in writing to the Company.
h. Mandatory Conversion. Subject to Section 12, if
any Preferred Shares remain outstanding on the Mandatory Conversion
Date (as defined below), then all such Preferred Shares shall be
converted as of such date in accordance with this Section 2 as if the
holders of such Preferred Shares had given the Conversion Notice on the
Mandatory Conversion Date; provided, however, that if a Triggering
Event has occurred and is continuing on the Mandatory Conversion Date,
then the Company shall, within five business days following the
Mandatory Conversion Date (unless otherwise notified in writing by the
holder of its request to have the Preferred Shares converted into
Common Stock), pay to each holder of Preferred Shares then outstanding,
in immediately available funds, an amount equal to the Triggering Event
Redemption Price as of the Mandatory Conversion Date. All holders of
Preferred Shares shall thereupon surrender all Preferred Stock
Certificates, duly endorsed for cancellation, to the Company or the
Transfer Agent, provided that the Company has complied with its
obligations under this Section 2(h). Notwithstanding the foregoing, if
the Common Stock is not designated for quotation on the Nasdaq SmallCap
Market, the Nasdaq National Market or listed on The New York Stock
Exchange, Inc. or The American Stock Exchange, Inc. but such events do
not constitute a Triggering Event, then the Mandatory Conversion Date
shall be extended until the Common Stock is so designated or listed.
"Mandatory Conversion Date" means the date which is five years after
the applicable Issuance Date, subject to extension (i) as described in
the immediately preceding sentence, and (ii) pursuant to Section 3(u)
of the Registration Rights Agreement, which extension shall be equal to
one day for each day in any Allowable Grace Period (as defined in the
Registration Rights Agreement).
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i. Fractional Shares. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. All shares of
Common Stock (including fractions thereof) issuable upon conversion of
more than one Preferred Share by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the
issuance of a fraction of a share of Common Stock. If, after the
aforementioned aggregation, the issuance would result in the issuance
of a fraction of a share of Common Stock, the Company shall round such
fraction of a share of Common Stock up or down to the nearest whole
share.
j. Conversion Restrictions. The right of a holder of
Preferred Shares to convert Preferred Shares pursuant to this Section 2
shall be limited as set forth below. Without the prior consent of the
Company, a holder shall not be entitled to convert any Preferred Shares
(as defined in the Securities Purchase Agreement) at a conversion price
less than the applicable Fixed Conversion Price during the period
beginning on the Closing Date and ending on the earlier of (i) the date
the Registration Statement is declared effective by the SEC, and (ii)
the Effectiveness Deadline. Notwithstanding the foregoing, the
conversion restrictions set forth in this Section 2(j) shall not apply
(y) if there shall have occurred a Material Adverse Change (as defined
below) or (z) the Company files a registration statement covering the
issuance or resale of any shares of Common Stock other than the
Registration Statement under the Registration Rights Agreement. For
purposes of this Section 2(j), "Material Adverse Change" means any
change, event, result or happening involving the Company or any of its
subsidiaries resulting in a material adverse effect on the business,
financial condition or results or operations of the Company and its
subsidiaries, taken as a whole, including, without limitation, an event
constituting a Major Transaction (as defined in Section 3(c)) or a
Triggering Event (as defined in Section 3(d)) shall have occurred or
the Company shall have been notified by the exchange or automated
quotation system on which the Common Stock trades that it is beginning
or has begun proceedings or steps to delist or suspend the Common Stock
from trading on such market.
k. Taxes. The Company shall pay any and all taxes
which may be imposed upon it with respect to the issuance and delivery
of Common Stock upon the conversion of the Preferred Shares except for
taxes as a result of a transfer to a party other than an initial
holder.
3. Redemption at Option of Holders.
a. Redemption Option Upon Major Transaction. In
addition to all other rights of the holders of Preferred Shares
contained herein, simultaneous with the occurrence of a Major
Transaction (as defined below), each holder of Preferred Shares shall
have the right, at such holder's option, to require the Company to
redeem all or a portion of such holder's Preferred Shares at a price
per Preferred Share equal to 125% of the Liquidation Preference (as
defined in Section 9 below) ("Major Transaction Redemption Price").
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b. Redemption Option Upon Triggering Event. In
addition to all other rights of the holders of Preferred Shares
contained herein, after a Triggering Event (as defined below), each
holder of Preferred Shares shall have the right, at such holder's
option, to require the Company to redeem all or a portion of such
holder's Preferred Shares at a price per Preferred Share equal to the
greater of (i) 125% of the Liquidation Preference, and (ii) the product
of (A) the Conversion Rate at such time, and (B) the Closing Bid Price
calculated as of the date immediately preceding such Triggering Event
on which the exchange or market on which the Common Stock is traded is
open ("Triggering Event Redemption Price" and, collectively with "Major
Transaction Redemption Price," the "Redemption Price").
c. "Major Transaction". A "Major Transaction" shall
be deemed to have occurred at such time as any of the following events:
(i) the consolidation, merger or other
business combination of the Company with or into another Person (other
than (A) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company, or (B) a
consolidation, merger or other business combination in which the
Company is the surviving entity and holders of the Company's voting
power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, the voting power necessary
to elect a majority of the members of the board of directors of the
Company);
(ii) the sale or transfer of all or
substantially all of the Company's assets; or
(iii) consummation of a purchase, tender or
exchange offer made to the holders of more than 30% of the outstanding
shares of Common Stock.
d. "Triggering Event". A "Triggering Event" shall be
deemed to have occurred at such time as any of the following events:
(i) the failure of the Registration
Statement to be declared effective by the SEC on or prior to the date
which is 45 days after the Effectiveness Deadline except where the
failure of the Registration Statement to be declared effective was the
result solely of actions by the holders of Registrable Securities;
(ii) while the Registration Statement is
required to be maintained effective pursuant to the terms of the
Registration Rights Agreement, the effectiveness of the Registration
Statement lapses for any reason (including, without limitation, the
issuance of a stop order) or is unavailable to the holder of the
Preferred Shares for sale of the Registrable Securities (as defined in
the Registration Rights Agreement) in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability
continues for a period of five consecutive trading days, provided that
the cause of such lapse or unavailability is not due to factors solely
within the control of such holder of Preferred Shares;
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<PAGE>
(iii) the suspension from listing or the
failure of the Common Stock to be listed on the Nasdaq SmallCap Market,
the Nasdaq National Market, The New York Stock Exchange, Inc. or The
American Stock Exchange, Inc. for a period of five consecutive days;
(iv) Company's notice to any holder of
Preferred Shares or shares of the Series A Convertible Preferred Stock
of the Company (the "Series A Shares"), including by way of public
announcement, at any time, of its intention not to comply with proper
requests for conversion of any Preferred Shares or Series A Shares into
shares of Common Stock, including any of the reasons set forth in
Section 4(a) below;
(v) the Company's stockholders fail to
approve the proposal contemplated by Section 4(j) of the Securities
Purchase Agreement on or before the earlier of the first meeting of the
Company's stockholders after the initial Issuance Date and 150 days
after the initial Issuance Date;
(vi) the Company breaches any
representation, warranty, covenant or other term or condition of the
Securities Purchase Agreement, the Registration Rights Agreement, this
Article IV or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated
thereby or hereby, except to the extent that such breach would not have
a Material Adverse Effect (as defined in Section 3(a) of the Securities
Purchase Agreement) and except, in the case of a breach of a covenant
which is curable, only if such breach continues for a period of at
least ten days; or
(vii) Randy S. Selman ceases to hold at
least one of the offices of Chief Executive Officer or President of the
Company prior to March 1, 2000 for any reason other than because of
death or disability.
e. Mechanics of Redemption at Option of Buyer Upon
Major Transaction. No sooner than 15 days nor later than 10 days prior
to the consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver
written notice thereof via facsimile and overnight courier ("Notice of
Major Transaction") to each holder of Preferred Shares. At any time
after receipt of a Notice of Major Transaction (or, in the event a
Notice of Major Transaction is not delivered at least 10 days prior to
a Major Transaction, at any time within 10 days prior to a Major
Transaction), any holder of Preferred Shares then outstanding may
require the Company to redeem, effective immediately prior to the
consummation of such Major Transaction, all of the holder's Preferred
Shares then outstanding by delivering written notice thereof via
facsimile and overnight courier ("Notice of Redemption at Option of
Buyer Upon Major Transaction") to the Company, which Notice of
Redemption at Option of Buyer Upon Major Transaction shall indicate (i)
the number of Preferred Shares that such holder is electing to redeem,
and (ii) the applicable Major Transaction Redemption Price, as
calculated pursuant to Section 3(a) above.
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f. Mechanics of Redemption at Option of Buyer Upon
Triggering Event. Within one (1) business day after the occurrence of a
Triggering Event, the Company shall deliver written notice thereof via
facsimile and overnight courier ("Notice of Triggering Event") to each
holder of Preferred Shares. At any time after the earlier of a holder's
receipt of a Notice of Triggering Event and such holder becoming aware
of a Triggering Event, any holder of Preferred Shares then outstanding
may require the Company to redeem all of the Preferred Shares by
delivering written notice thereof via facsimile and overnight courier
("Notice of Redemption at Option of Buyer Upon Triggering Event") to
the Company, which Notice of Redemption at Option of Buyer Upon
Triggering Event shall indicate (i) the number of Preferred Shares that
such holder is electing to redeem, and (ii) the applicable Triggering
Event Redemption Price, as calculated pursuant to Section 3(b) above.
g. Payment of Redemption Price. Upon the Company's
receipt of a Notice(s) of Redemption at Option of Buyer Upon Triggering
Event or a Notice(s) of Redemption at Option of Buyer Upon Major
Transaction from any holder of Preferred Shares, the Company shall
immediately notify each holder of Preferred Shares by facsimile of the
Company's receipt of such Notice(s) of Redemption at Option of Buyer
Upon Triggering Event or Notice(s) of Redemption at Option of Buyer
Upon Major Transaction and each holder which has sent such a notice
shall promptly submit to the Company or its Transfer Agent such
holder's Preferred Stock Certificates which such holder has elected to
have redeemed. The Company shall deliver the applicable Triggering
Event Redemption Price, in the case of a redemption pursuant to Section
3(f), to such holder within five (5) business days after the Company's
receipt of a Notice of Redemption at Option of Buyer Upon Triggering
Event and, in the case of a redemption pursuant to Section 3(e), the
Company shall deliver the applicable Major Transaction Redemption Price
immediately prior to the consummation of the Major Transaction;
provided that a holder's Preferred Stock Certificates shall have been
so delivered to the Company; provided further that if the Company is
unable to redeem all of the Preferred Shares to be redeemed, the
Company shall redeem an amount from each holder of Preferred Shares
being redeemed equal to such holder's pro-rata amount (based on the
number of Preferred Shares held by such holder relative to the number
of Preferred Shares outstanding) of all Preferred Shares being
redeemed. If the Company shall fail to redeem all of the Preferred
Shares submitted for redemption (other than pursuant to a dispute as to
the arithmetic calculation of the Redemption Price), in addition to any
remedy such holder of Preferred Shares may have under these Articles of
Amendment and the Securities Purchase Agreement, the applicable
Redemption Price payable in respect of such unredeemed Preferred Shares
shall bear interest at the rate of 2.5% per month (prorated for partial
months) until paid in full. Until the Company pays such unpaid
applicable Redemption Price in full to a holder of Preferred Shares
submitted for redemption, such holder shall have the option (the "Void
Optional Redemption Option") to, in lieu of redemption, require the
Company to promptly return to such holder(s) all of the Preferred
Shares that were submitted for redemption by such holder(s) under this
Section 3 and for which the applicable Redemption Price has not been
paid, by sending written notice thereof to the Company via facsimile
(the "Void Optional
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Redemption Notice"). Upon the Company's receipt of such Void Optional
Redemption Notice(s) and prior to payment of the full applicable
Redemption Price to such holder, (i) the Notice(s) of Redemption at
Option of Buyer Upon Triggering Event or the Notice(s) of Redemption at
Option of Buyer Upon Major Transaction, as the case may be, shall be
null and void with respect to those Preferred Shares submitted for
redemption and for which the applicable Redemption Price has not been
paid, (ii) the Company shall immediately return any Preferred Shares
submitted to the Company by each holder for redemption under this
Section 3(g) and for which the applicable Redemption Price has not been
paid, (iii) the Fixed Conversion Price of such returned Preferred
Shares shall be adjusted to the lesser of (A) the Fixed Conversion
Price as in effect on the date on which the Void Optional Redemption
Notice(s) is delivered to the Company and (B) the lowest Closing Bid
Price during the period beginning on the date on which the Notice(s) of
Redemption of Option of Buyer Upon Major Transaction or the Notice(s)
of Redemption at Option of Buyer Upon Triggering event, as the case may
be, is delivered to the Company and ending on the date on which the
Void Optional Redemption Notice(s) is delivered to the Company;
provided that no adjustment shall be made if such adjustment would
result in an increase of the Fixed Conversion Price then in effect, and
(iv) the Conversion Percentage in effect at such time shall be reduced
by a number of percentage points equal to the product of (A) .50 and
(B) the number of days in the period beginning on the date which is the
last date on which the Triggering Event Redemption Price or Major
Transaction Redemption Price, as the case may be, is required to be
delivered in accordance with the foregoing provisions of this Section
3(g) and ending on the date on which the Void Optional Redemption
Notice(s) is delivered to the Company. Notwithstanding the foregoing,
in the event of a dispute as to the determination of the Closing Bid
Price or the arithmetic calculation of the Redemption Price, such
dispute shall be resolved pursuant to Section 2(g)(iii) above with the
term "Closing Bid Price" being substituted for the term "Average Market
Price" and the term "Redemption Price" being substituted for the term
"Conversion Rate". A holder's delivery of a Void Optional Redemption
Notice and exercise of its rights following such notice shall not
effect the Company's obligations to make any payments which have
accrued prior to the date of such notice. Subject to the rights of the
Company's Series A Preferred Stock, payments provided for in this
Section 3 shall have priority to payments to other stockholders in
connection with a Major Transaction.
4. Inability to Fully Convert.
a. Holder's Option if Company Cannot Fully Convert.
If, upon the Company's receipt of a Conversion Notice or on the
Mandatory Conversion Date, the Company can not issue shares of Common
Stock registered for resale under the Registration Statement for any
reason, including, without limitation, because the Company (x) does not
have a sufficient number of shares of Common Stock authorized and
available, (y) is otherwise prohibited by applicable law or by the
rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the
Company or its Securities, including without limitation the Exchange
Cap (as defined
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below), from issuing all of the Common Stock which is to be issued to a
holder of Preferred Shares pursuant to a Conversion Notice or (z) fails
to have a sufficient number of shares of Common Stock registered for
resale under the Registration Statement, then the Company shall issue
as many shares of Common Stock as it is able to issue in accordance
with such holder's Conversion Notice and pursuant to Section 2(g) above
and, with respect to the unconverted Preferred Shares, the holder,
solely at such holder's option, can elect to:
(i) require the Company to redeem from such
holder those Preferred Shares for which the Company is unable to issue
Common Stock in accordance with such holder's Conversion Notice
("Mandatory Redemption") at a price per Preferred Share (the "Mandatory
Redemption Price") equal to the Triggering Event Redemption Price as of
such Conversion Date;
(ii) if the Company's inability to fully
convert Preferred Shares is pursuant to Section 4(a)(z) above, require
the Company to issue restricted shares of Common Stock in accordance
with such holder's Conversion Notice and pursuant to Section 2(g)
above;
(iii) void its Conversion Notice and retain
or have returned, as the case may be, the nonconverted Preferred Shares
that were to be converted pursuant to such holder's Conversion Notice
(provided that a holder's voiding its Conversion Notice shall not
effect the Company's obligations to make any payments which have
accrued prior to the date of such notice); or
(iv) if the Company's inability to fully
convert Preferred Shares is pursuant to the Exchange Cap described in
Section 4(a)(y) above, and the issuance of additional Conversion Shares
at a Conversion Price equal to the Market Price would not violate the
rules or regulations of The Nasdaq Stock Market, Inc., then, subject to
Section 12, require the Company to issue shares of Common Stock in
accordance with such holder's Conversion Notice and pursuant to Section
2(g) above at a Conversion Price equal to the Market Price of the
Common Stock on the date of such holder's Notice in Response to
Inability to Convert (as defined below).
b. Mechanics of Fulfilling Holder's Election. The
Company shall immediately send via facsimile to a holder of Preferred
Shares, upon receipt of a facsimile copy of a Conversion Notice from
such holder which cannot be fully satisfied as described in Section
4(a) above, a notice of the Company's inability to fully satisfy such
holder's Conversion Notice (the "Inability to Fully Convert Notice").
Such Inability to Fully Convert Notice shall indicate (i) the reason
why the Company is unable to fully satisfy such holder's Conversion
Notice, (ii) the number of Preferred Shares which cannot be converted,
and (iii) the applicable Mandatory Redemption Price. Such holder shall
notify the Company of its election pursuant to Section 4(a) above by
delivering written notice via facsimile to the Company ("Notice in
Response to Inability to Convert").
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c. Payment of Redemption Price. If such holder shall
elect to have its shares redeemed pursuant to Section 4(a)(i) above,
the Company shall pay the Mandatory Redemption Price in cash to such
holder within thirty (30) days of the Company's receipt of the holder's
Notice in Response to Inability to Convert, provided that prior to the
Company's receipt of the holder's Notice in Response to Inability to
Convert the Company has not delivered a notice to such holder stating,
to the satisfaction of the holder, that the event or condition
resulting in the Mandatory Redemption has been cured and all Conversion
Shares issuable to such holder can and will be delivered to the holder
in accordance with the terms of Section 2(g). If the Company shall fail
to pay the applicable Mandatory Redemption Price to such holder on a
timely basis as described in this Section 4(c) (other than pursuant to
a dispute as to the determination of the arithmetic calculation of the
Redemption Price), in addition to any remedy such holder of Preferred
Shares may have under these Articles of Amendment and the Securities
Purchase Agreement, such unpaid amount shall bear interest at the rate
of 2.5% per month (or the maximum rate permitted by applicable law,
whichever is lower) (prorated for partial months) until paid in full.
Until the full Mandatory Redemption Price is paid in full to such
holder, such holder may void the Mandatory Redemption with respect to
those Preferred Shares for which the full Mandatory Redemption Price
has not been paid and (i) receive back such Preferred Shares, and (ii)
the Fixed Conversion Price of such returned Preferred Shares shall be
adjusted to the lesser of (A) the Fixed Conversion Price as in effect
on the date on which the holder voided the Mandatory Redemption, and
(B) the lowest Closing Bid Price during the period beginning on the
Conversion Date and ending on the date the holder voided the Mandatory
Redemption. Notwithstanding the foregoing, if the Company fails to pay
the applicable Mandatory Redemption Price within such thirty (30) days
time period due to a dispute as to the determination of the arithmetic
calculation of the Redemption Rate, such dispute shall be resolved
pursuant to Section 2(g)(iii) above with the term "Redemption Price"
being substituted for the term "Conversion Rate".
d. Pro-rata Conversion and Redemption. In the event
the Company receives a Conversion Notice from more than one holder of
Preferred Shares on the same day and the Company can convert and redeem
some, but not all, of the Preferred Shares pursuant to this Section 4,
the Company shall convert and redeem from each holder of Preferred
Shares electing to have Preferred Shares converted and redeemed at such
time an amount equal to such holder's pro-rata amount (based on the
number of Preferred Shares held by such holder relative to the number
of Preferred Shares outstanding) of all Preferred Shares being
converted and redeemed at such time.
5. Company's Right to Redeem in Lieu of Conversion. (a)
Notwithstanding Section 2 or anything herein to the contrary, but
subject to Sections 5(c) and 5(e), at any time after the initial
Issuance Date, the Company may elect to redeem Preferred Shares
submitted for conversion in lieu of converting such Preferred Shares,
provided that the closing price of the Common Stock as reported by
Bloomberg is less than $2.50 (appropriately adjusted for any stock
dividend, stock split or other similar transaction) (a "Company
Redemption in
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Lieu of Conversion"). If the Company elects to redeem some, but not
all, of the Preferred Shares submitted for conversion, the Company
shall redeem a number of Preferred Shares from each holder of Preferred
Shares submitted for conversion on the applicable date equal to such
holder's pro-rata amount (based on the number of Preferred Shares held
by such holder relative to the number of Preferred Shares outstanding)
of all Preferred Shares submitted for conversion which the Company
elects to redeem.
(b) Redemption Price of Company Redemption in Lieu of
Conversion. The "Redemption Price of Company Redemption in Lieu of
Conversion" shall be an amount per Preferred Share equal to the product
of (i) the Conversion Rate of the Preferred Shares on the Conversion
Date and (ii) the last reported sale price of the Common Stock (as
reported by Bloomberg) on the Conversion Date.
(c) Mechanics of Company Redemption in Lieu of
Conversion. The Company shall exercise its right to redeem by
delivering written notice by facsimile and overnight courier ("Notice
of Company Redemption in Lieu of Conversion") to (i) each holder of the
Preferred Shares and (ii) the Transfer Agent. Such Notice of Company
Redemption in Lieu of Conversion shall indicate (A) the maximum, if
any, number of Preferred Shares which shall be subject to Company
Redemption in Lieu of Conversion which maximum number of Preferred
Shares, if less than all of the Preferred Shares outstanding, shall be
allocated pro rata among the holders of Preferred Shares (based on the
number of Preferred Shares held by each holder on the date of the
Company's delivery of Notice of Company Redemption in Lieu of
Conversion relative to the total number of Preferred Shares outstanding
on such date), (B) confirm the time period during which the Company may
effect Company Redemption in Lieu of conversion, which period shall
begin on and include the date which is three business days after the
date of receipt by all of the holders' of the Notice of Redemption in
Lieu of Conversion and shall end on and include the date which is 30
calendar days after the third business day following the date of
receipt by all of the holders of the Notice of Redemption in Lieu of
Conversion (the "Redemption in Lieu of Conversion Period"). The Company
may terminate a Redemption in Lieu of Conversion Period at any time
with respect to Preferred Shares which have not been submitted for
conversion by delivering written notice of such termination to each
holder of Preferred Shares by facsimile and overnight courier at least
five days business days prior to the date of such termination. Any
Preferred Shares submitted for conversion after the termination of the
Redemption in Lieu of Conversion Period or the number of which is in
excess of the maximum number of Preferred Shares designated in the
Notice of Company Redemption in Lieu of Conversion shall be converted
in accordance with Section 2. Notwithstanding anything to the contrary
contained in this Section 5, prior to the commencement of the
Redemption in Lieu of Conversion Period, upon delivery of a Conversion
Notice by a holder of Preferred Shares to the Company, the Company must
convert the related Preferred Shares and issue the applicable shares of
Common stock in accordance with the terms of Section 2, and the Company
may not redeem such Preferred Shares submitted for conversion pursuant
to the terms of this Section 5.
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(d) Payment of Redemption Price. The Company shall
pay the applicable Redemption Price of Company Redemption in Lieu of
Conversion to the holder of the Preferred Shares being redeemed in cash
within five business days after the Conversion Date, but not prior to
such holder's delivery to the Company of the Preferred Stock
Certificates representing the Preferred Shares being redeemed. If the
Company shall fail to pay the applicable Redemption Price of Company
Redemption in Lieu of Conversion to such holder on a timely basis as
described in this Section 5(d), in addition to any remedy such holder
of Preferred Shares may have under these Articles of Amendment, the
Securities Purchase Agreement and the Registration Rights Agreement,
such unpaid amount shall bear interest at the rate of 2.5% per month
(or the maximum rate permitted by law, whichever is lower), pro rated
for partial months, until paid in full. Until the Company pays such
unpaid applicable Redemption Price of Company Redemption in Lieu of
Conversion in full to each holder, each holder of Preferred Shares
submitted for redemption pursuant to this Section 5 and for which the
applicable Redemption Price of Company Redemption in Lieu of Conversion
has not been paid, shall have the option (the "Void Company Redemption
Option") to, in lieu of redemption, require the Company to promptly
return to each holder all of the Preferred Shares that were submitted
for redemption by such holder under this Section 5 and for which the
applicable Redemption Price of Company Redemption in Lieu of Conversion
has not been paid, by sending written notice thereof to the Company via
facsimile (the "Void Company Redemption Notice"). Upon the Company's
receipt of such Void Company Redemption Notice(s) prior to payment of
the full applicable redemption price to each holder, (i) the Company's
Redemption in Lieu of Conversion shall be null and void with respect to
those Preferred Shares submitted for redemption and for which the
applicable Redemption Price has not been paid, (ii) the Company shall
immediately return any Preferred Shares submitted to the Company by
each holder for redemption under this Section 5 and for which the
applicable Redemption Price of Company Redemption in Lieu of Conversion
has not been paid, and (iii) the Fixed Conversion Price of such
returned Preferred Shares shall be adjusted to the lesser of (A) the
Conversion Price applicable to such conversion on the date on which
such Preferred Shares were originally presented for conversion, and (B)
the Conversion Price which would have been effect if such Preferred
Shares were presented for conversion on the business day immediately
following the last day on which the Company could have effected a
timely Company Redemption in Lieu of Conversion. Notwithstanding the
foregoing, if the Company fails to pay the applicable Redemption Price
of Company Redemption in Lieu of Conversion to a holder within the time
period described in this Section 5(d) due to a dispute as to the
arithmetic calculation of the Redemption Price of Company Redemption in
Lieu of Conversion, such dispute shall be resolved pursuant to Section
2(f)(iii) above with the term "Redemption Price of Company Redemption
in Lieu of Conversion" being substituted for the term "Conversion
Rate." If the Company fails to timely effect a Company Redemption in
Lieu of Conversion in accordance with this Section 5, the Company shall
not be allowed to submit another Notice of Company Redemption in Lieu
of Conversion without the prior written consent of the holders of at
least two-thirds (2/3) of the Preferred Shares then outstanding.
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<PAGE>
(e) Company Must Have Immediately Available Funds or
Credit Facilities. The Company shall not be entitled to send any Notice
of Company Redemption in Lieu of Conversion pursuant to Section 5(b)
above and begin the redemption procedure under this Section 5, unless
it has:
(1) the full amount of the Redemption Price
of Company Redemption in Lieu of Conversion in cash, available in a
demand or other immediately available account in a bank or similar
financial institution;
(2) credit facilities, with a bank or
similar financial institutions that are immediately available and
unrestricted for use in redeeming the Preferred Shares, in the full
amount of the Redemption Price of Company Redemption in Lieu of
Conversion;
(3) a written agreement with a standby
underwriter or qualified buyer ready, willing and able to purchase from
the Company a sufficient number of shares of stock to provide proceeds
necessary to redeem any stock that is not converted prior to a Company
Redemption in Lieu of Conversion; or
(4) a combination of the items set forth in
the preceding clauses (i), (ii) and (iii), aggregating the full amount
of the Redemption Price of Company Redemption in Lieu of Conversion.
6. Reissuance of Certificates. In the event of a conversion or
redemption pursuant to these Articles of Amendment of less than all of
the Preferred Shares represented by a particular Preferred Stock
Certificate, the Company shall promptly cause to be issued and
delivered to the holder of such Preferred Shares a preferred stock
certificate representing the remaining Preferred Shares which have not
been so converted or redeemed.
7. Reservation of Shares. The Company shall, so long as any of
the Preferred Shares are outstanding, reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares then outstanding; provided
that the number of shares of Common Stock so reserved shall at no time
be less than 200% of the number of shares of Common Stock for which the
Preferred Shares are at any time convertible. The initial number of
shares of Common Stock reserved for conversions of the Preferred Shares
and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Preferred Shares based on
the number of Preferred Shares held by each holder at the time of
issuance of the Preferred Shares or increase in the number of reserved
shares, as the case may be. In the event a holder shall sell or
otherwise transfer any of such holder's Preferred Shares, each
transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any
shares of Common Stock reserved and which remain allocated to any
person or entity which does not hold any
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Preferred Shares shall be allocated to the remaining holders of
Preferred Shares, pro rata based on the number of Preferred Shares then
held by such holder.
8. Voting Rights. Holders of Preferred Shares shall have no
voting rights, except as required by law, including but not limited to
the Florida Business Corporation Act, and as expressly provided in
these Articles of Amendment.
9. Liquidation, Dissolution, Winding-Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the Preferred Shares shall be entitled to
receive in cash out of the assets of the Company, whether from capital
or from earnings available for distribution to its stockholders (the
"Preferred Funds"), before any amount shall be paid to the holders of
any of the capital stock of the Company of any class junior in rank to
the Preferred Shares in respect of the preferences as to the
distributions and payments on the liquidation, dissolution and winding
up of the Company but after payment to any holder of the Company's
Class A Convertible Preferred Stock, an amount per Preferred Share
equal to the sum of (i) $5,000, and (ii) an amount equal to the product
of (.05) (N/365) ($5,000) (such sum being referred to as the
"Liquidation Preference"); provided that, if the Preferred Funds are
insufficient to pay the full amount due to the holders of Preferred
Shares and holders of shares of other classes or series of preferred
stock of the Company that are of equal rank with the Preferred Shares
as to payments of Preferred Funds (the "Pari Passu Shares"), then each
holder of Preferred Shares and Pari Passu Shares shall receive a
percentage of the Preferred Funds equal to the full amount of Preferred
Funds payable to such holder as a liquidation preference, in accordance
with the Articles of Incorporation of the Company then in effect, as a
percentage of the full amount of Preferred Funds payable to all holders
of Preferred Shares and Pari Passu Shares. The purchase or redemption
by the Company of stock of any class, in any manner permitted by law,
shall not, for the purposes hereof, be regarded as a liquidation,
dissolution or winding up of the Company. Neither the consolidation or
merger of the Company with or into any other Person, nor the sale or
transfer by the Company of less than substantially all of its assets,
shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company. No holder of Preferred Shares
shall be entitled to receive any amounts with respect thereto upon any
liquidation, dissolution or winding up of the Company other than the
amounts provided for herein; provided that a holder of Preferred Shares
shall be entitled to all amounts previously accrued with respect to
amounts owed hereunder.
10. Preferred Rank; Participation. (i) All shares of Common
Stock shall be of junior rank to all Preferred Shares in respect to the
preferences as to distributions and payments upon the liquidation,
dissolution and winding up of the Company. The rights of the shares of
Common Stock shall be subject to the preferences and relative rights of
the Preferred Shares. The Preferred Shares shall rank junior to the
Series A Convertible Preferred Stock. Without the prior express written
consent of the holders of not less than two-thirds (2/3) of the then
outstanding Preferred Shares, the Company shall not hereafter
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<PAGE>
authorize or issue additional or other capital stock that is of senior
rank to the Preferred Shares in respect of the preferences as to
distributions and payments upon the liquidation, dissolution and
winding up of the Company. Without the prior express written consent of
the holders of not less than two-thirds (2/3) of the then outstanding
Preferred Shares, the Company shall not hereafter authorize or make any
amendment to the Company's Articles of Incorporation or bylaws, or file
any resolution of the board of directors of the Company with the
Florida Secretary of State containing any provisions, which would
adversely affect or otherwise impair the rights or relative priority of
the holders of the Preferred Shares relative to the holders of the
Common Stock or the holders of any other class of capital stock. In the
event of the merger or consolidation of the Company with or into
another corporation, the Preferred Shares shall maintain their relative
powers, designations and preferences provided for herein and no merger
shall result inconsistent therewith.
(ii) Subject to the rights of the holders, if any, of the Pari
Passu Shares, the holders of the Preferred Shares shall, as holders of
Preferred Stock, be entitled to such dividends paid and distributions
made to the holders of Common Stock to the same extent as if such
holders of Preferred Shares had converted the Preferred Shares into
Common Stock (without regard to any limitations on conversion herein or
elsewhere) and had held such shares of Common Stock on the record date
for such dividends and distributions. Payments under the preceding
sentence shall be made concurrently with the dividend or distribution
to the holders of Common Stock.
11. Restriction on Redemption and Cash Dividends with respect
to Other Capital Stock. Until all of the Preferred Shares have been converted or
redeemed as provided herein the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or cash distribution on, its Common
Stock without the prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares.
12. Limitation on Number of Conversion Shares. Notwithstanding
any other provision herein, the Company shall not be obligated to issue any
shares of Common Stock upon conversion of the Preferred Shares if the issuance
of such shares of Common Stock would exceed that number of shares of Common
Stock which the Company may issue upon Conversion of the Preferred Shares (the
"Exchange Cap") without breaching the Company's obligations under the rules or
regulations of The Nasdaq Stock Market, Inc., except that such limitation shall
not apply in the event that the Company (a) obtains the approval of its
stockholders as required by applicable rules and regulations of The Nasdaq Stock
Market for issuances of Common Stock in excess of such amount, or (b) obtains a
written opinion from outside counsel to the Company that such approval is not
required, which opinion shall be reasonably satisfactory to the holders of a
majority of the Preferred Shares then outstanding. Until such approval or
written opinion is obtained, no purchaser of Preferred Shares pursuant to the
Securities Purchase Agreement (the "Purchasers") shall be issued, upon
conversion of Preferred Shares, shares of Common Stock in an amount greater than
the product of (i) the Exchange Cap amount multiplied by (ii) a fraction, the
numerator of which is the number of Preferred Shares issued to such Purchaser
pursuant to the Securities Purchase Agreement and the
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denominator of which is the aggregate amount of all the Preferred Shares issued
to the Purchasers pursuant to the Securities Purchase Agreement (the "Cap
Allocation Amount"). In the event that any Purchaser shall sell or otherwise
transfer any of such Purchaser's Preferred Shares, the transferee shall be
allocated a pro rata portion of such Purchaser's Cap Allocation Amount. In the
event that any holder of Preferred Shares shall convert all of such holder's
Preferred Shares into a number of shares of Common Stock which, in the
aggregate, is less than such holder's Cap Allocation Amount, then the difference
between such holder's Cap Allocation Amount and the number of shares of Common
Stock actually issued to such holder shall be allocated to the respective Cap
Allocation Amounts of the remaining holders of Preferred Shares on a pro rata
basis in proportion to the number of Preferred Shares then held by each such
holder. (As of the date hereof, 746,047 shares equal 19.99% of the issued and
outstanding shares of the Company's Common Stock.)
13. Vote to Change the Terms of Preferred Shares. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than two-thirds (2/3) of
the then outstanding Preferred Shares, shall be required for (a) any change to
these Articles of Amendment or the Company's Certificate of Incorporation which
would amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Preferred Shares, or (b) the Company to issue any
Preferred Shares other than pursuant to the Security Purchase Agreement.
14. Lost or Stolen Certificates. Upon receipt by the Company
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the holder to the Company and, in the case of mutilation, upon
surrender and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like tenor and
date; provided, however, the Company shall not be obligated to re-issue
preferred stock certificates if the holder contemporaneously requests the
Company to convert such Preferred Shares into Common Stock in which case such
Preferred Shares shall be converted pursuant to the terms of the Articles of
Amendment and a preferred stock certificate shall only be issued if required
pursuant to the terms hereof.
15. Remedies, Characterizations, Other Obligations, Breaches
and Injunctive Relief. The remedies provided in these Articles of Amendment
shall be cumulative and in addition to all other remedies available under these
Articles of Amendment, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a holder's right to pursue actual damages for any
failure by the Company to comply with the terms of these Articles of Amendment.
The Company covenants to each holder of Preferred Shares that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the holder thereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
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<PAGE>
hereunder will cause irreparable harm to the holders of the Preferred Shares and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holders of the Preferred Shares shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
16. Specific Shall Not Limit General; Construction. No
specific provision contained in these Articles of Amendment shall limit or
modify any more general provision contained herein. These Articles of Amendment
shall be deemed to be jointly drafted by the Company and all Buyers and shall
not be construed against any person as the drafter hereof.
17. Failure or Indulgence Not Waiver. No failure or delay on
the part of a holder of Preferred Shares in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
18. Form of Conversion Notice. Each Conversion Notice required
to be delivered by a holder of Preferred Shares shall be in the following form:
VISUAL DATA CORPORATION
CONVERSION NOTICE
Reference is made to the Articles of Amendment to the Articles of Incorporation
(the "Articles of Amendment"). In accordance with and pursuant to the Articles
of Amendment, the undersigned hereby elects to convert the number of shares of
Series A-1 Convertible Preferred Stock, par value $0.0001 per share (the
"Preferred Shares"), of Visual Data Corporation, a Florida corporation (the
"Company"), indicated below into shares of Common Stock, no par value per share
(the "Common Stock"), of the Company, by tendering the stock certificate(s)
representing the share(s) of Preferred Shares specified below as of the date
specified below.
Date of Conversion:____________________________________________________
Number of Preferred Shares to be converted:____________________________
Stock certificate no(s). of Preferred Shares to be converted:__________
Please confirm the following information:
Conversion Price:______________________________________________________
Number of shares of Common Stock to be issued:_________________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
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Issue to:______________________________________________________________
______________________________________________________________
______________________________________________________________
Facsimile Number:______________________________________________________
Authorization:_________________________________________________________
By:______________________________________________________
Title:___________________________________________________
Dated:_________________________________________________________________
Account Number:
(if electronic book entry transfer):_________________________________
Transaction Code Number (if electronic book entry transfer):___________
IN WITNESS WHEREOF, the Company has caused these Articles of Amendment
to be signed on behalf of the Company, as of the ___ day of ___________, 1998.
VISUAL DATA CORPORATION
(a Florida corporation)
By: /s/ Randy S. Selman
-----------------------
Name: Randy S. Selman
Its: President
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EXHIBIT 4
WARRANT TO PURCHASE COMMON STOCK
Date of Issuance: August 11, 1998 Warrant to Purchase An Aggregate of
20,000 shares of Common Stock
FOR VALUE RECEIVED, Visual Data Corporation, a Florida corporation (the
"Company"), pursuant to the terms and conditions of that certain Security
Purchase Agreement of even date herewith (the "Agreement") by and between the
Company and WEC Investors IV LLC, a Delaware limited liability company (the
"Holder") promises to issue in the name of, and sell and deliver to the Holder a
certificate or certificates for an aggregate of 20,000 shares of the Company's
common stock, par value $.00001 per share (the "Common Stock"), upon payment by
the Holder of $4.00 per share (the "Exercise Price"), with the Exercise Price
being subject to adjustment in the circumstances set forth below.
Section 1.
Exercise of Warrant
1.1 Exercise Period. The Holder may exercise this Warrant, in whole or
in part (but not as to fractional shares), at any time and time to time
commencing upon the date hereof (the "Vesting Date") and ending at 5:00 p.m.,
Eastern Time, on the fourth (4th) anniversary of the Vesting Date (the "Exercise
Period").
1.2 Exercise Procedure.
a. This Warrant will be deemed to have been exercised at such
time as the Company has received all of the following items (the "Exercise
Date"):
i. a completed Exercise Agreement, in the form
attached hereto as Exhibit 1 hereto, executed by the Holder (the "Purchaser");
and
ii. a cashier's or official bank check or other
immediately available funds payable to the Company in an amount equal to the sum
of the product of the Exercise Price multiplied by the number of shares of
Common Stock being purchased upon such exercise.
b. Certificates for the shares of Common Stock purchased upon
exercise of this Warrant will be delivered by the Company to the Purchaser
within five (5) business days after the Exercise Date. Unless this Warrant has
expired or all of the purchase rights represented hereby have been exercised,
the Company will prepare a new Warrant representing the rights formerly
represented by this Warrant that have not expired or been
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exercised. The Company will, within such five (5) day period, deliver such new
Warrant to the Holder at the address set forth in this Warrant.
c. The shares of Common Stock issuable upon the exercise of
this Warrant will be deemed to have been transferred to the Purchaser on the
Exercise Date, and the Purchaser will be deemed for all purposes to have become
the record holder of such Common Stock on the Exercise Date.
d. The issuance of certificates for shares of Common Stock
upon the exercise of this Warrant will be made without charge to the Purchaser
for any issuance tax in respect thereof or any other cost incurred by the
Company in connection with such exercise and related transfer of the shares;
provided, however, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any certificate or instrument in a name other than that of the Holder of this
Warrant, and that the Company shall not be required to issue or deliver any such
certificate or instrument unless and until the person or persons requiring the
issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
e. Unless the Company shall have registered the shares of
Common Stock underlying this Warrant pursuant to the provisions of Section 6
hereof, the shares of Common Stock issuable upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended (the
"Act") and, accordingly, will be "restricted securities" as that term is defined
in the Act. The Company may insert the following or similar legend on the face
of the certificates evidencing shares of Common Stock if required in compliance
with state securities laws:
"These securities have not been registered under any state securities laws and
may not be sold or otherwise transferred or disposed of except pursuant to an
effective registration statement under any applicable state securities laws, or
an opinion of counsel satisfactory to counsel to the Company that an exemption
from registration under any applicable state securities laws is available."
1.3 Fractional Shares. If a fractional share of Common Stock would, but
for the provisions of Subsection 1.1, be issuable upon exercise of the rights
represented by this Warrant, the Company will, within 30 days after the Exercise
Date, deliver to the Purchaser a check payable to the Purchaser, in lieu of such
fractional share, in an amount equal to the value of such fractional share as
determined by the closing price of the Company's Common Stock as reported on the
principal exchange on which the Company's Common Stock is then traded, as of the
close of business on the Exercise Date.
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Section 2.
Effect of Reorganization, Reclassification, Consolidation, Merger or Sale
2.1 Recapitalization or Reclassification of Common Stock. In case the
Company shall at any time prior to the exercise or termination of this Warrant
effect a recapitalization or reclassification of such character that its Common
Stock shall be changed into or become exchangeable for a larger or smaller
number of shares, then, upon the effective date thereof, the number of shares of
Common Stock that the Holder of this Warrant shall be entitled to purchase upon
exercise hereof shall be increased or decreased, as the case may be, in direct
proportion to the increase or decrease in such number of shares of Common Stock
by reason of such recapitalization or reclassification, and the Exercise Price
of such recapitalized or reclassified Common Stock shall, in the case of an
increase in the number of shares, be proportionately decreased and, in the case
of a decrease in the number of shares, be proportionately increased.
2.2 Consolidation, Merger or Sale. In case the Company shall at any
time prior to the exercise of this Warrant, or the expiration of the Exercise
Period, whichever first occurs, consolidate or merge with any other corporation
(unless the Company shall be the surviving entity) or transfer all or
substantially all of its assets to any other corporation preparatory to a
dissolution, then the Company shall, as a condition precedent to such
transaction, cause effective provision to be made so that the Holder of this
Warrant, upon the exercise thereof after the effective date of such transaction,
shall be entitled to receive the kind and amount of shares, evidences of
indebtedness, and/or other property receivable on such transaction by a holder
of the number of shares of Common Stock as to which the Warrant was exercisable
immediately prior to such transaction (without giving effect to any restriction
upon such exercise); and, in any such case, appropriate provision shall be made
with respect to the rights and interests of the Holder hereof to the effect that
the provisions of this Warrant shall thereafter be applicable (as nearly as may
be practicable) with respect to any shares, evidences of indebtedness, or other
securities or assets thereafter deliverable upon exercise of this Warrant.
2.3 Notice of Adjustment. Whenever the number of shares of Common Stock
purchasable upon exercise of this Warrant shall be adjusted as provided herein,
the Company shall file with its corporate records a certificate of its Chief
Financial Officer setting forth the computation and the adjusted number of
shares of Common Stock purchasable hereunder resulting from such adjustments,
and a copy of such certificate shall be mailed to the Holder. Any such
certificate or letter shall be conclusive evidence as to the correctness of the
adjustment or adjustments referred to therein and shall be available for
inspection by the holders of the Warrants on any day during normal business
hours.
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Section 3.
Reservation of Common Stock
The Company will at all time reserve and keep available such number of
shares of Common Stock as will be sufficient to permit the exercise in full of
this Warrant. Upon exercise of this Warrant pursuant to its terms, the Holder
will acquire fully paid and non-assessable ownership rights of the Common Stock,
free and clear of any liens, claims or encumbrances.
Section 4.
No Shareholder Rights or Obligations
This Warrant will not entitle the Holder hereof to any voting rights or
other rights as a shareholder of the Company. Until the shares of Common Stock
issuable upon the exercise of this Warrant are recorded as issued on the books
and records of the Company's transfer agent, the Holder shall not be entitled to
any voting rights or other rights as a shareholder; provided, however, the
Company uses its bests efforts to ensure that, upon receipt of the Exercise
Agreement and payment of the Exercise Price, the appropriate documentation
necessary to effectuate the exercise of the Warrant and the issuance of the
Common Stock is accomplished as expeditiously as possible. No provision of this
Warrant, in the absence of affirmative action by the Holder to purchase Common
Stock, and no enumeration in this Warrant of the rights or privileges of the
Holder, will give rise to any obligation of such Holder for the Exercise Price
or as a stockholder of the Company.
Section 5.
Transferability
Subject to the terms hereof, this Warrant and all rights hereunder are
transferrable, in whole or in part, upon surrender of this Warrant with a
properly executed Assignment in the form of Exhibit 2 hereto at the principal
offices of the Company. This Warrant and the underlying shares of Common Stock
may not be offered, sold or transferred except in compliance with the Act, and
any applicable state securities laws, and then only against receipt of an
agreement of the person to whom such offer or sale or transfer is made to comply
with the provisions of this Warrant with respect to any resale or other
disposition of such securities; provided that no such agreement shall be
required from any person purchasing this Warrant or the underlying shares of
Common Stock pursuant to a registration statement effective under the Act. The
Holder of this Warrant agrees that, prior to the disposition of any security
purchased on the exercise hereof other than pursuant to an registration
statement then effective under the Act, or any similar statute then in effect,
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the Holder shall give written notice to the Company, expressing his intention as
to such disposition. Upon receiving such notice, the Company shall present a
copy thereof to its securities counsel. If, in the sole opinion of such counsel,
which such opinion shall not be unreasonably withheld, the proposed disposition
does not require registration of such security under the Act, or any similar
statute then in effect, the Company shall, as promptly as practicable, notify
the Holder of such opinion, whereupon the Holder shall be entitled to dispose of
such security in accordance with the terms of the notice delivered by the Holder
to the Company.
Section 6.
Registration Rights
The shares of Common Stock issuable upon exercise of this Warrant are
subject to registration under the Act pursuant to the terms and conditions of
that certain Registration Rights Agreement of even date herewith by and between
the Company and the Holder.
Section 7.
Miscellaneous
7.1 Notices. Any notices, requests or consents hereunder shall be
deemed given, and any instruments delivered, two days after they have been
mailed by first class mail, postage prepaid, or upon receipt if delivered
personally or by facsimile transmission, as follows:
If to the Company: 1291 SW 29 Avenue
Pompano Beach, Florida 33069
With a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, Florida 33301
Attention: Roxanne K. Beilly, Esq.
If to the Holder: c/o West End Capital LLC
One World Trade Center
Suite 4563
New York, New York 10048
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With a copy to: Pryor Cashman Sherman & Flynn LLP
410 Park Avenue, 10th Floor
New York, New York 10022
Attention: Mark Saks, Esq.
except that any of the foregoing may from time to time by written notice to the
other designate another address which shall thereupon become its effective
address for the purposes of this paragraph.
7.2 Entire Agreement. This Warrant, including the exhibits and
documents referred to herein which are a part hereof, contain the entire
understanding of the parties hereto with respect to the subject matter and may
be amended only by a written instrument executed by the parties hereto or their
successors or assigns. Any paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Warrant.
7.3 Governing Law. The corporate laws of the State of Florida shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions regarding the construction, validity,
enforcement and interpretation of this Warrant shall be governed by the internal
laws of the State of New York without regard to the principles of conflict of
laws. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting the City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. 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 to such
party at the address for such notices to it under this Warrant 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. If any provision of this
Warrant shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Warrant in that jurisdiction or the validity or enforceability
of any provision of this Warrant in any other jurisdiction.
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IN WITNESS WHEREOF, this Warrant has been duly executed and the
corporate seal affixed hereto, all as of the day and year first above written.
VISUAL DATA CORPORATION
By:________________________________
Randy S. Selman, President
ATTEST:
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EXHIBIT 1
EXERCISE AGREEMENT
To: Dated:
The undersigned record Holder, pursuant to the provisions set forth in
the within Warrant, hereby subscribed for and purchases shares of Common Stock
covered by such Warrant and hereby makes full cash payment of $ for such shares
at the Exercise Price provided by such Warrant.
______________________________
(Signature)
______________________________
(Print or type name)
______________________________
(Address)
______________________________
______________________________
NOTICE: The signature of this Exercise Agreement must correspond with
the name as written upon the face of the within Warrant, or upon the Assignment
thereof, if applicable, in every particular, without alteration, enlargement or
any change whatsoever.
<PAGE>
EXHIBIT 2
ASSIGNMENT
FOR VALUE RECEIVED, , the undersigned Holder hereby sell, assigns, and
transfer all of the rights of the undersigned under the within Warrant with
respect to the number of shares of Common Stock issuable upon the exercise of
such Warrant set forth below, unto the Assignee identified below, and does
hereby irrevocable constituted and appoint to effect such transfer of rights on
the books of the Company, with full power of substitution:
Number of Shares
Name of Assignee Address of Assignee of Common Stock
- --------------------------------------------------------------------------------
Dated:_________ ___________________________
(Signature of Holder)
___________________________
(Print or type name)
NOTICE: The signature of this Exercise Agreement must correspond with
the name as written upon the face of the within Warrant, or upon the Assignment
thereof, if applicable, in every particular, without alteration, enlargement or
any change whatsoever.
CONSENT OF ASSIGNEE
I HEREBY CONSENT to abide by the terms and conditions of the within
Warrant.
Dated:_________ ___________________________
(Signature of Assignee)
___________________________
(Print or type name)
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of August 11,
1998, by and among Visual Data Corporation, a Florida corporation, with
headquarters located at 1291 SW 29 Avenue, Pompano Beach, Florida 33069 (the
"Company"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Company has authorized the following new series of its Preferred
Stock, no par value per share (the "Preferred Stock"): the Company's Series A-1
Convertible Preferred Stock (the "Preferred Shares"), which shall be convertible
into shares of the Company's Common Stock, par value $0.0001 per share (the
"Common Stock") (as converted, the "Preferred Conversion Shares"), in accordance
with the terms of the Company's Articles of Amendment to the Articles of
Incorporation, substantially in the form attached hereto as Exhibit A (the
"Articles of Amendment");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, (i) initially an aggregate of 150 of the Preferred Shares (the
"Preferred Shares") and (ii) a warrant (the "Warrant") to purchase 20,000 shares
of the Company's Common Stock (as exercised, the "Warrant Conversion Shares") in
accordance with the terms of the Warrant to Purchase Common Stock (the "Warrant
to Purchase Common Stock") in the respective amounts set forth opposite each
Buyer's name on the Schedule of Buyers on the Closing Date (as defined below);
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
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NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANT.
a. Purchase of Preferred Shares and Warrant. Subject to
satisfaction (or waiver) of the conditions set forth in Sections 6(a) and 7(a)
below, the Company shall issue and sell to each Buyer and each Buyer severally
agrees to purchase from the Company the respective number of Preferred Shares
and the Warrant set forth opposite such Buyer's name on the Schedule of Buyers,
(as defined below) (the "Closing"). The purchase price (the "Purchase Price") of
the Preferred Shares and the Warrants at the Closing shall be an aggregate of
$5,000 for each Preferred Share so purchased and the Purchase Price of each
Preferred Share at the Additional Closing shall be $5,000.
b. The Closing Date. The date and time of the Closing (the
"Closing Date") shall be 10:00 a.m. Eastern Standard Time, within three (3)
business days following the date hereof, subject to notification of satisfaction
(or waiver) of the conditions to the Closing set forth in Sections 6(a) and 7(a)
below (or such later date as is mutually agreed to by the Company and the
Buyers). The Closing shall occur at the offices of Pryor, Cashman, Sherman &
Flynn, LLP, 410 Park Avenue, 10th Floor, New York, NY 10022 or such other place
as the parties shall agree.
c. Form of Payment. On the Closing Date, (i) each Buyer shall
pay the Purchase Price to the Company for the Preferred Shares to be issued and
sold to such Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions, and (ii) the
Company shall deliver to each Buyer, stock certificates (in the denominations as
such Buyer shall request) (the "Stock Certificates") representing such number of
the Preferred Shares which such Buyer is then purchasing (as indicated opposite
such Buyer's name on the Schedule of Buyers) and, at the Closing, a Warrant to
Purchase Common Stock (the "Warrant Certificate") for the 20,000 Warrants so
purchased. Such Stock Certificates shall bear the restrictive legends required
pursuant to Section 2(g).
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the
Preferred Shares and (ii) upon conversion of the Preferred Share and/or the
exercise of the Warrants, will acquire the Preferred Conversion Shares and the
Warrant Conversion Shares (collectively, the "Conversion Shares") then issuable
(the Preferred Shares, the Warrant and the Conversion Shares collectively are
referred to herein as the "Securities"), for its own account for investment only
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof, except
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pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, such Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form to the Company, to
the effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C)
such Buyer provides the Company with assurance reasonably acceptable to the
Company that such Securities can be sold, assigned or
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<PAGE>
transferred pursuant to Rule 144 promulgated under the 1933 Act (or a successor
rule thereto) ("Rule 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. Legends. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and, until such time as the
sale of the Conversion Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of such Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that such
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold.
h. Authorization; Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms, subject as to
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enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
i. Residency/Principal Place of Business. Such Buyer is a resident of
or has a principal place of business in the country and state on the Schedule of
Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below) or the Articles
of Amendment.
b. Authorization; Enforcement; Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions, Warrant to Purchase Common Stock and
each of the other agreements entered into by the parties hereto in connection
with the transactions contemplated by this Agreement (collectively, the
"Transaction Documents"), and to issue the Securities in accordance with the
terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents and the Articles of Amendment by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including without
limitation the issuance of the Preferred Shares and the reservation for issuance
and the issuance of the Conversion Shares issuable upon conversion thereof, have
been duly authorized by the Company's Board of Directors and no further consent
or authorization is required by the Company, its Board of Directors or its
stockholders, (iii) the Transaction
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Documents have been duly executed and delivered by the Company, (iv) the
Transaction Documents constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies, and (v) prior to the Closing Date, the Articles of
Amendment has been filed with the Secretary of State of the State of Florida and
will be in full force and effect, enforceable against the Company in accordance
with its terms.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 20,000,000 shares of Common Stock,
of which as of the date hereof, 3,687,657 shares were issued and outstanding,
200,000 shares are issuable and reserved for issuance pursuant to the Company's
stock option plan and 5,784,581 shares (excluding shares issuable pursuant to
conversion of the Company's Series A Preferred Stock) are issuable and reserved
for issuance pursuant to securities (other than the Preferred Shares)
exercisable or exchangeable for, or convertible into, shares of Common Stock,
and (ii) 5,000,000 shares of preferred stock, which as of the date hereof, 150
were issued and outstanding. All of such outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and nonassessable. As of the
date hereof, and subject to adjustment, the adjusted fixed conversion price
applicable to the Series A Convertible Preferred Stock of the Company is
$3.1625. Schedule 3(c) contains a list of outstanding securities of the Company
which are subject to registration rights. Except as disclosed in Schedule 3(c),
(i) no shares of the Company's capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement), (v) there are no
outstanding securities of the Company or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement, and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the Buyers true and
correct copies of the Company's
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Articles of Incorporation, as amended and as in effect on the date hereof (the
"Articles of Incorporation"), and the Company's By-laws, as in effect on the
date hereof (the "By-laws"), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto.
d. Issuance of Securities. The Preferred Shares and the
Warrants are duly authorized and, upon issuance in accordance with the terms
hereof, shall be (i) validly issued, fully paid and non-assessable, (ii) free
from all taxes, liens and charges with respect to the issue thereof and (iii)
entitled to the rights and preferences set forth in the Articles of Amendment.
Upon conversion in accordance with the Articles of Amendment, the Conversion
Shares will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Articles of
Amendment and the consummation by the Company of the transactions contemplated
hereby and thereby will not (i) result in a violation of the Articles of
Incorporation, any Articles of Amendment, Preferences and Rights of any
outstanding series of Preferred Stock of the Company or the By-laws or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or material instrument to which the Company or any of its Subsidiaries
is a party, or result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of the principal market or exchange on which the
Common Stock is traded or listed) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Except as disclosed in Schedule 3(e), neither
the Company nor its Subsidiaries is in violation of any term of or in default
under the Articles of Incorporation, any Articles of Amendment, Preferences and
Rights of any outstanding series of Preferred Stock or the By-laws or their
organizational charter or by-laws, respectively, or any contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its Subsidiaries,
except for possible conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations that would not individually or in
the aggregate have a Material Adverse Effect. The business of the Company and
its Subsidiaries is not being conducted in violation of any law, ordinance,
regulation of any governmental entity having authority or jurisdiction over the
Company, except for possible violations the sanctions for which either
individually or in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under the
1933 Act, the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self regulatory agency in order for it to execute,
deliver or perform any of its obligations under or
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contemplated by the Transaction Documents or to perform its obligations under
the Articles of Amendment, in each case in accordance with the terms hereof or
thereof. Except as disclosed in Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company is not in violation of the listing requirements of
the Nasdaq SmallCap Market as in effect on the date hereof and on each of the
Closing Dates and is not aware of any facts which would reasonably lead to
delisting of the Common Stock by the Nasdaq SmallCap Market in the foreseeable
future.
f. SEC Documents; Financial Statements. Since July 30, 1997,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Buyers or their respective
representatives true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, 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 Documents have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g) since September 1997, there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition or results of operations of the Company or its Subsidiaries. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
its
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Subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, except as set forth in Schedule 3(h) or which would
not result in a Material Adverse Effect to the Company.
i. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
business, properties, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly announced.
j. No Integrated Offering. The Company has not, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions including, without limitation,
under the rules and regulations of the NASDAQ Stock Market, Inc., nor will the
Company or any of its Subsidiaries take any action or steps that would require
registration of the Securities under the 1933 Act or cause the offering of
Securities to be integrated with other offerings.
k. No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
l. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that relations with
their employees are good. No executive officer (as defined in Rule 501(f) of the
1933 Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company.
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m. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(m), none of the
Company's trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights necessary to conduct its business as now or as proposed to be
conducted have expired or terminated, or are expected to expire or terminate
within two years from the date of this Agreement. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service mark
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3(m), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its Subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service mark registrations, trade secret or other infringement;
and the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties.
n. Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.
o. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(o) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company or any of
its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
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p. Insurance. Neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or operations
of the Company and its Subsidiaries, taken as a whole.
q. Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such items would not
have, individually or in the aggregate, a Material Adverse Effect and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit.
r. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is a party to any contract or agreement
which in the reasonable judgment of the Company's officers has or is expected to
have a Material Adverse Effect.
s. Tax Status. Except as set forth on Schedule 3(s), the
Company and each of its Subsidiaries has made or filed all federal and state
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.
t. Certain Transactions. Except as set forth on Schedule 3(t)
and in the SEC Documents and except for arm's length transactions pursuant to
which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties and other
than the grant of stock options disclosed on Schedule 3(c), none of the officers
or directors of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services
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to or by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer or director or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer or director has a substantial interest or is an officer,
director, trustee or partner.
u. Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares and/or exercise of the Warrants will increase in certain circumstances.
The Company further acknowledges that, subject to such limitations as are
expressly set forth in the Transaction Documents, its obligation to issue
Conversion Shares upon conversion of the Preferred Shares and/or exercise of the
Warrants in accordance with this Agreement, the Warrant to purchase Common Stock
and the Articles of Amendment is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
v. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with Buyer relating to the terms or conditions
of the transactions contemplated by the Transaction Documents except as set
forth in the Transaction Documents.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
each Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date. The Company shall make all filings and reports relating the
offer and sale of the Securities required under the applicable securities or
"Blue Sky" laws of the states of the United States following the Closing Date.
c. Reporting Status. Until the earlier of (i) the date which
is one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all the
Conversion Shares and (B) none of the Preferred Shares is outstanding (the
"Registration Period"), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the
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1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration Period: (i) within five (5) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements or amendments (other than on Form S-8) filed pursuant to
the 1933 Act; (ii) on the same day as the release thereof, facsimile copies of
all press releases issued by the Company or any of its Subsidiaries and (iii)
copies of any notices and other information made available or given to the
stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 200% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares.
g. Right of First Refusal. Subject to the right of first
refusal of the holders of the Company's Series A Preferred Stock and the
exceptions described below, the Company and its Subsidiaries shall not contract
with any party for any equity financing (including any debt financing with an
equity component) or issue any equity securities, other than pursuant to
existing agreements set forth on Schedule 4(g), of the Company or any Subsidiary
or securities convertible or exchangeable into or for equity securities of the
Company or any Subsidiary (including debt securities with an equity component)
in any form ("Future Offerings") during the period beginning on the Closing Date
and ending on and including the date which is the later of 365 days after the
Initial Closing Date and 180 days after the Additional Closing Date, unless it
shall have first delivered to each Buyer or a designee appointed by such Buyer
written notice (the "Future Offering Notice") describing the proposed Future
Offering, including the terms and conditions thereof, and providing each Buyer
an option to purchase up to its Aggregate Percentage (as defined below), as of
the date of delivery of the Future Offering Notice, in the Future Offering (the
limitations referred to in this sentence are collectively referred to as the
"Capital Raising Limitation"). For purposes of this Section 4(g), "Aggregate
Percentage" at any time with respect to any Buyer shall mean the percentage
obtained by dividing (i) the aggregate number of Preferred Shares purchased by
such Buyer at the Closings by (ii) the aggregate number of Preferred Shares
purchased by all Buyers at the Closings. A Buyer can exercise its option to
participate in a Future Offering by delivering written notice thereof to
participate to the Company within ten (10) business days of receipt of a Future
Offering Notice, which notice shall state the quantity of
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securities being offered in the Future Offering that such Buyer will purchase,
up to its Aggregate Percentage, and that number of securities it is willing to
purchase in excess of its Aggregate Percentage. In the event that one or more
Buyers fail to elect to purchase up to each such Buyer's Aggregate Percentage
then each Buyer which has indicated that it is willing to purchase a number of
securities in excess of its Aggregate Percentage shall be entitled to purchase
its pro rata portion (determined in the same manner as described in the
preceding sentence) of the securities in the Future Offering which one or more
Buyers have not elected to purchase. In the event the Buyers fail to elect to
fully participate in the Future Offering within the periods described in this
Section 4(g), the Company shall not be obligated to sell any of the securities
of the Future Offering to any of the Buyers and the Company shall have 45 days
thereafter to sell the securities of the Future Offering upon terms and
conditions (including the amount thereof), no more favorable to the purchasers
thereof than specified in the Future Offering Notice. In the event the Company
has not sold such securities of the Future Offering within such 45 day period,
the Company shall not thereafter issue or sell such securities without first
offering such securities to the Buyers in the manner provided in this Section
4(g). The Capital Raising Limitation shall not apply to (i) a loan from a
commercial bank which does not have any equity feature, (ii) any transaction
involving the Company's issuances of securities (A) as consideration in a merger
or consolidation, (B) in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital), or (C) as
consideration for the acquisition of a business, product or license or other
assets by the Company, (iii) the issuance of Common Stock in a firm commitment,
underwritten public offering, (iv) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, or (v) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option plan, restricted stock plan or stock purchase plan for the benefit of the
Company's employees or directors. The Buyers shall not be required to
participate or exercise their right of first refusal with respect to a
particular Future Offering in order to exercise their right of first refusal
with respect to later Future Offerings.
h. Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation system
(including the Nasdaq SmallCap Market and the Nasdaq National Market), if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents and the Articles of
Amendment. The Company shall maintain the Common Stock's authorization for
quotation on the Nasdaq SmallCap Market, the Nasdaq National Market, The New
York Stock Exchange, Inc. ("NYSE") or The American Stock Exchange, Inc.
("AMEX"). Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Stock on the Nasdaq National Market, NYSE or AMEX. The Company shall
promptly provide to each Buyer copies of any notices it receives from the Nasdaq
SmallCap Market, the Nasdaq National
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Market, NYSE or AMEX regarding the continued eligibility of the Common Stock for
listing on such automated quotation system or securities exchange. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(g).
i. Expenses. Subject to Section 9(l) below, at the Closing,
the Company shall reimburse the Buyers for the Buyers' reasonable accountable
expenses (including attorneys fees and expenses) in connection with negotiating
and preparing the Transaction Documents and consummating the transactions
contemplated thereby up to an aggregate of $15,000 upon presentation of
documentation, if requested by the Company.
j. Proxy Statement. The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which shall
be not later than 120 days after the Closing Date (the "Stockholder Meeting
Deadline"), a proxy statement, which has been previously reviewed by the Buyers
and a counsel of their choice, soliciting each such stockholder's affirmative
vote at such stockholder meeting for approval of the Company's issuance of all
of the Securities as described in this Agreement, and the Company shall use its
best efforts to solicit its stockholders' approval of such issuance of the
Securities and cause the Board of Directors of the Company to recommend to the
stockholders that they approve such proposal. If the Company fails to hold a
meeting of its stockholders by the Stockholder Meeting Deadline (unless such
failure is the result solely of the actions of the Buyers), then, as partial
relief (which remedy shall not be exclusive of any other remedies available at
law or in equity), the Company shall pay to each holder of Preferred Shares an
amount in cash per Preferred Share equal to the product of (i) $5,000 multiplied
by (ii) .025 multiplied by (iii) the quotient of (x) the number of days after
the Stockholder Meeting Deadline that a meeting of the Company's stockholders is
not held, divided by (y) 30. The Company shall make the payments referred to in
the immediately preceding sentence within five days of the earlier of (I) the
holding of the meeting of the Company's stockholders, the failure of which
resulted in the requirement to make such payments and (II) the last day of each
30-day period beginning on the Stockholder Meeting Deadline. In the event the
Company fails to make such payments in a timely manner, such payments shall bear
interest at the rate of 2.0% per month (pro rated for partial months) until paid
in full.
k. No Violation of Law. The Company and its Subsidiaries shall
conduct their business in accordance with all laws, ordinances, regulations of
any governmental entity having authority or jurisdiction over the Company,
except for possible violations the sanctions for which either individually or in
the aggregate would not have a Material Adverse Effect.
l. Transactions With Affiliates. So long as any Preferred
Shares are outstanding the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, person who were officers or directors at any time during
the
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previous two years, stockholders who beneficially own 5% or more of the Common
Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "Related Party"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, or (c) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who is
also an officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" or "affiliates" for purposes hereof
means, with respect to any person or entity, another person or entity that,
directly or indirectly, (i) has a 5% or more equity interest in that person or
entity, (ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. "Control" or "controls" for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.
m. Filing of Form 8-K. On or before the fifteenth (15th) day
following the Closing Date, the Company shall file a Form 8-K with the SEC
describing the terms of the transaction contemplated by the Transaction
Documents and consummated at the Closing, in each case in the form required by
the 1934 Act.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares in such amounts as specified from time to time by each Buyer
to the Company upon conversion of the Preferred Shares (the "Irrevocable
Transfer Agent Instructions"). Prior to registration of the Conversion Shares
under the 1933 Act, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares, prior to registration of the
Conversion Shares under the 1933 Act) will be given by the Company to its
transfer agent and that the Securities shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section 5 shall
affect in any way each Buyer's obligations and agreements set forth in Section
2(g) to comply with all applicable prospectus delivery requirements, if any,
upon resale of the Securities. If a Buyer provides the Company with an opinion
of counsel, in generally acceptable form, that registration of a resale by such
Buyer of any of such Securities is not required under the 1933 Act, the Company
shall permit the transfer, and, in the case of the Conversion Shares, promptly
instruct
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its transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any restrictive legends.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Preferred Shares to each Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents and delivered the same to the Company.
(ii) The Articles of Amendment shall have been filed with the
Secretary of State of the State of Florida.
(iii) Such Buyer shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by such Buyer
at the Closing by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company.
(iv) The representations and warranties of such Buyer shall be
true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties
that speak as of a specific date), and such Buyer shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. Closing Date. The obligation of each Buyer hereunder to
purchase the Preferred Shares at the Closing is subject to the satisfaction, at
or before the Closing Date, of each
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of the following conditions, provided that these conditions are for each Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(ii) The Articles of Amendment shall have been filed with the
Secretary of State of the State of Florida, and a copy thereof
certified by such Secretary of State shall have been delivered to such
Buyer.
(iii) The Common Stock shall be authorized for quotation on
the Nasdaq SmallCap Market, trading in the Common Stock shall not have
been suspended by the SEC, The Nasdaq Stock Market, Inc., at any time
beginning on the date hereof and through and including the Closing
Date.
(iv) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties
that speak as of a specific date) and the Company shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably
requested by such Buyer including, without limitation, an update as of
the Closing Date regarding the representation contained in Section 3(c)
above.
(v) Such Buyer shall have received the opinion of the
Company's counsel dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially
the form of Exhibit C attached hereto.
(vi) The Company shall have executed and delivered to such
Buyer the Stock Certificates (in such denominations as such Buyer shall
request) for the Preferred Shares being purchased by such Buyer at the
Closing.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Buyer (the "Resolutions").
(viii) The Irrevocable Transfer Agent Instructions, in the
form of Exhibit D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
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(ix) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the
Company and each Subsidiary in such corporation's state of
incorporation issued by the Secretary of State of such state of
incorporation as of a date within 10 days of the Closing.
(x) The Company shall have delivered to such Buyer a certified
copy of its Articles of Incorporation as certified by the Secretary of
State of the State of Florida within ten days of the Closing Date.
(xi) The Company shall have delivered to such Buyer a
secretary's certificate, dated as the Closing Date, as to (i) the
resolutions described in Section 7(a)(vii), (ii) the Articles of
Incorporation and (iii) the Bylaws, each as in effect at the Closing.
(xii) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents and the Articles of Amendment, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities
and all of their stockholders, officers, directors, employees and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or the Articles of Amendment or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or the Articles of Amendment or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out of
or resulting from the execution, delivery, performance or enforcement of the
Transaction Documents or the Articles of Amendment or any other certificate,
instrument or document contemplated hereby or thereby, (d) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities or (e) the status of such Buyer or
holder of the Securities as an investor in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum
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contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. The corporate laws of the State of Florida
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York without regard to the principles of
conflict of laws. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting the City of New York,
borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, 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 brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. 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 to such party at the address for such 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.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which 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; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
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e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Preferred Shares
then outstanding, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Preferred Shares then outstanding. No consideration shall
be offered or paid to any person to amend or consent to a waiver or modification
of any provision of any of the Transaction Documents or the Articles of
Amendment unless the same consideration also is offered to all of the parties to
the Transaction Documents or holders of Preferred Shares, as the case may be.
f. Notices. Any notices consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically generated and kept on
file by the sending party); or (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company: Visual Data Corporation
1291 SW 29 Avenue
Pompano Beach, Florida 33069
Telephone: (954) 917-6655
Facsimile: (954) 917-6660
Attention: Randy S. Selman
With a copy to: Atlas Pearlman Trop & Borkson, P.A.
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, Florida 33301
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
Attention: Joel D. Mayersohn, Esq.
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If to the Transfer Agent: Interwest Transfer Company, Inc.
1981 East Murray Holladay Road
Suite 100
Salt Lake City, Utah 84117
Telephone: (801) 272-9294
Facsimile: (801) 277-3147
Attention: Melinda Orth
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers.
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. A Buyer may assign
some or all of its rights hereunder to affiliates or associates of such Buyer,
without the consent of the Company, and to others, with the consent of the
Company, which consent shall not be unreasonably withheld; provided, however,
that any such assignment shall not release such Buyer from its obligations
hereunder unless such obligations are assumed by such assignee and the Company
has consented to such assignment and assumption. Notwithstanding anything to the
contrary contained in the Transaction Documents, Buyer shall be entitled to
pledge the Securities in connection with a bona fide margin account.
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive each
of the Closings. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
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k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before three (3) business days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the
non-breaching Buyers for the expenses described in Section 4(i) above.
m. Placement Agent. Each of the Company and the Buyers, on
their own behalf, acknowledges that it has not engaged a placement agent in
connection with the sale of the Preferred Shares. The Company shall be
responsible for the payment of any placement agent's fees or broker's
commissions relating to or arising out of the purchase of the Securities by the
Buyers. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, attorneys' fees and
out-of-pocket expenses) arising in connection with any such claim.
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Buyer and each holder of Preferred Shares,
Conversion Shares shall have all rights and remedies set forth in this
Agreement, the Articles of Incorporation and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
p. Number of Conversion Shares. Notwithstanding any other
provision herein or in the Articles of Amendment, the Company shall not be
obligated to issue any shares of Common Stock upon conversion of the Preferred
Shares if the issuance of such shares of Common Stock would exceed that number
of shares of Common Stock which the Company may issue upon Conversion of the
Preferred Shares (the "Exchange Cap") without breaching the Company's
obligations under the rules or regulations of the Nasdaq Stock Market, Inc.,
except that such
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limitation shall not apply in the event that the Company (a) obtains the
approval of its stockholders as required by applicable rules and regulations of
The Nasdaq Stock Market for issuances of Common Stock in excess of such amount
or (b) obtains a written opinion from outside counsel to the Company that such
approval is not required, which opinion shall be reasonably satisfactory to the
holders of a majority of the Preferred Shares then outstanding. Until such
approval or written opinion is obtained, no Buyer pursuant to this Agreement or
the Articles of Amendment shall be issued, upon conversion of the Preferred
Shares, shares of Common Stock in an amount greater than the product of (i) the
Exchange Cap amount multiplied by (ii) a fraction, the numerator of which is the
number of Preferred Shares issued to such Buyer pursuant to this Agreement and
the denominator of which is the aggregate amount of all the Preferred Shares
issued to the Buyers pursuant to this Agreement (the "Cap Allocation Amount").
In the event that any Buyer shall sell or otherwise transfer any of such Buyer's
Preferred Shares, the transferee shall be allocated a pro rata portion of such
Buyer's Cap Allocation Amount. In the event that any holder of Preferred Shares
shall convert all of such holder's Preferred Shares into a number of shares of
Common Stock which, in the aggregate, is less than such holder's Cap Allocation
Amount, then the difference between such holder's Cap Allocation Amount and the
number of shares of Common Stock actually issued to such holder shall be
allocated to the respective Cap Allocation Amounts of the remaining holders of
Preferred Shares on a pro rata basis in proportion to the number of Preferred
Shares then held by each such holder.
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
VISUAL DATA CORPORATION ________________________________
By:_____________________________ By:_____________________________
Name:___________________________
Name:___________________________
Its:____________________________ Its: ___________________________
________________________________
By: ____________________________
Its:____________________________
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SCHEDULE OF BUYERS
WEC Investors IV LLC
c/o West End Capital LLC
One World Trade Center
Suite 4563
New York, NY 10048
Attention: Daniel J. Saks
with a copy to:
Pryor, Cashman, Sherman & Flynn, LLP
410 Park Avenue
10th Floor
New York, NY 10022
Attention: Mark Saks
WEC Investors IV LLC is a Delaware limited liability company.
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August
11, 1998, by and among Visual Data Corporation, a Florida corporation, with
headquarters located at 1291 SW 29 Avenue, Pompano Beach, Florida 33069
(the"Company"), and the undersigned buyers (each, a "Buyer" and collectively,
the"Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers (i) shares of the
Company's Series A-1 Convertible Preferred Stock (the "Preferred Shares"), which
will be convertible into shares of the Company's common stock, par value $0.0001
per share (the "Common Stock") (as converted, the "Conversion Shares"), in
accordance with the terms of the Company's Articles of Amendment to Articles of
incorporation (the "Articles of Amendment") and (ii) a warrant (the "Warrant")
to purchase 20,000 shares of the Company's Common Stock in accordance with the
terms of the Warrant to Purchase Common Stock (the "Warrant to Purchase Common
Stock"); and
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Investor" means a Buyer and any transferee or assignee thereof to
whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9.
b. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
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c. "Register," "registered," and "registration" refer to a registration
effected by preparing and filing one or more Registration Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement(s) by the United States Securities and Exchange Commission (the
"SEC").
d. "Registrable Securities" means (i) the Conversion Shares issued or
issuable upon conversion of the Preferred Shares, any shares of capital stock
issued or issuable with respect to the Conversion Shares or the Preferred Shares
as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, regardless of any limitation on conversions of
Preferred Shares and (ii) the shares of Common Stock issuable upon the exercise
of the Warrant to Purchase Common Stock, including any shares issuable as a
result of any stock split, stock dividend, recapitalization or similar event.
e. "Registration Statement" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, as soon as
practicable but in no event later than the Filing Deadline (as defined below),
file with the SEC a Registration Statement or Registration Statements (as is
necessary) on Form S-3 (or, if such form is unavailable for such a registration,
on such other form as is available for such a registration, subject to the
consent of the Investors holding a majority of the Registrable Securities and
the provisions of Section 2(c), which consent will not be unreasonably
withheld), covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Shares (i) to prevent dilution resulting from
stock splits, stock dividends or similar transactions and (ii) by reason of
changes in the Conversion Price or Conversion Rate of the Preferred Shares in
accordance with the terms thereof. Such Registration Statement shall initially
register for resale 1,000,000 shares of Common Stock, subject to adjustment as
provided in Section 3(b). Such registered shares of Common Stock shall be
allocated among the Investors pro rata based on the total number of Registrable
Securities issued or issuable as of each date that a Registration Statement, as
amended, relating to the resale of the Registrable Securities is declared
effective by the SEC. The Company shall use its best efforts to have the
Registration Statement(s) declared effective by the SEC as soon as practicable,
but in no event later than the Effectiveness Deadline (as defined below). Except
for a Registration Statement filed by the Company in accordance with this
Section 2a, and the Company's Post-Effective Registration Statement filed in
accordance with the Company's initial public offering, during the period of time
beginning on the date hereof through
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the date which is ninety (90) days after a Registration Statement filed by the
Company in accordance with this Section 2a has been filed and is continuously
effective, the Company shall not file any other Registration Statements.
b. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time of such establishment or increase, as the case may be.
In the event an Investor shall sell or otherwise transfer any of such holder's
Registrable Securities, each transferee shall be allocated a pro rata portion of
the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any person or entity
which does not hold any Registrable Securities shall be allocated to the
remaining Investors, pro rata based on the number of Registrable Securities then
held by such Investors. For the avoidance of doubt, the number of Registrable
Securities held by any Investor shall be determined as if all Preferred Shares
then outstanding were converted into or exercised for Registrable Securities.
c. Counsel and Investment Bankers. Subject to Section 5 hereof, in
connection with any offering pursuant to Section 2, the Investors shall have the
right to select one legal counsel and, in the event that the holders of
Registrable Securities are exercising their rights pursuant to Section 2(d), an
investment banker or bankers and manager or managers to administer their
interest in the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company. The Company shall
reasonably cooperate with any such counsel and investment bankers.
d. Piggy-Back Registrations. If at any time prior to the expiration of
the Registration Period (as hereinafter defined) the number of shares of Common
Stock available for sale under the Registration Statement is insufficient to
cover all of the Registrable Securities (as defined in Section 3(b)) and the
Company proposes to file with the SEC a Registration Statement relating to an
offering for its own account or the account of others under the 1933 Act of any
of its securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with stock
option or other employee benefit plans) the Company shall promptly send to each
Investor who is entitled to registration rights under this Section 2(d) written
notice of the Company's intention to file a Registration Statement and of such
Investor's rights under this Section 2(d) and, if within twenty (20) days after
receipt of such notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, subject to the priorities
set forth in Section 2(e) below. No right to registration of Registrable
Securities under this Section 2(d) shall be construed to limit any registration
required under Section 2(a). The obligations of the Company under this Section
2(d) may be waived by Investors holding a majority of the Registrable
Securities. If an offering in connection with which an Investor is entitled to
registration under this Section 2(d) is an underwritten offering, then each
Investor whose Registrable Securities are included in such
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Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
e. Priority in Piggy-Back Registration Rights in Connection with
Registrations for Company Account. If the registration referred to in Section
2(d) is to be an underwritten public offering and the managing underwriter(s)
advise the Company in writing, that in their reasonable good faith opinion,
marketing or other factors dictate that a limitation on the number of shares of
Common Stock which may be included in the Registration Statement is necessary to
facilitate and not adversely affect the proposed offering, then the Company
shall include in such registration: (1) first, all securities the Company
proposes to sell for its own account, (2) second, up to the full number of
securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the Registration
Statement by reason of demand registration rights, (3) third, the securities
held by the Series A Holders (as defined below), and (4) fourth, the securities
requested to be registered by the Investors and other holders of securities
entitled to participate in the registration, as of the date hereof, drawn from
them pro rata based on the number each has requested to be included in such
registration.
f. Eligibility for Form SB-2 and Form S-3. The Company represents,
warrants and covenants that on and after the date hereof it meets the
requirements for the use of Form S-3 for registration of the sale by the
Investors of the Registrable Securities and the Company has filed and shall file
all reports required to be filed by the Company with the SEC in a timely manner
so as to obtain and maintain such eligibility for the use of Form SB-2 or Form
S-3. In the event that Form S-3 is not available for sale by the Investors of
the Registrable Securities, then the Company shall undertake to register the
Registrable Securities on Form S-3 as soon as such form is available, provided
that the Company shall maintain the effectiveness of the Registration Statement
then in effect until such time as a Registration Statement on Form S-3 covering
the Registrable Securities has been declared effective by the SEC.
g. Rule 416. The Company and the Investors each acknowledge that an
indeterminate number of Registrable Securities shall be registered pursuant to
Rule 416 under the 1933 Act so as to include in such Registration Statement any
and all Registrable Securities which may become issuable (i) to prevent dilution
resulting from stock splits, stock dividends or similar transactions and (ii) if
permitted by law, by reason of reductions in the Conversion Price (as defined in
the Articles of Amendment) of the Preferred Shares in accordance with the terms
thereof, including, without limitation, the terms which cause the Floating
Conversion Price (as defined in the Articles of Amendment) to decrease as the
bid price of the Common Stock decreases (collectively, the "Rule 416
Securities"). In this regard, the Company agrees to use all reasonable efforts
to ensure that the maximum number of Registrable Securities which may be
registered pursuant to Rule 416 under the 1933 Act are covered by the
Registration Statement and, absent guidance from the SEC or other definitive
authority to the contrary, the Company shall use all reasonable efforts to
affirmatively support and to not take any position adverse to the position that
the Registration Statement filed
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hereunder covers all of the Rule 416 Securities. If the Company reasonably
determines that the Registration Statement filed hereunder does not cover all of
the Rule 416 Securities, the Company shall immediately provide to each Investor
written notice setting forth the basis for the Company's position and the
authority therefor.
h. Registration Statement Election; Filing Deadline; Effectiveness
Deadline. For purposes of this Agreement, the "Filing Deadline" shall mean
August 15, 1998. For purposes of this Agreement "Effectiveness Deadline" shall
mean September 30, 1998 (provided, that, if the SEC reviews the Registration
Statement on Form S-3 and, in connection with such review, requests the audited
financial statements of the Company for the year ended September 30, 1998 before
it will declare such Registration Statement effective, then the Effectiveness
Deadline shall mean October 30, 1998).
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(d) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the Filing Deadline for the registration of Registrable Securities pursuant
to Section 2(a)) and use its best efforts to cause such Registration Statement
relating to the Registrable Securities to become effective as soon as possible
after such filing (but in no event later than the Effectiveness Deadline for the
registration of Registrable Securities), and keep such Registration Statement
effective pursuant to Rule 415 at all times until the earlier of (i) the date as
of which the Investors may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto) or (ii) the date on which (A) the Investors shall have sold all the
Registrable Securities and (B) none of the Preferred Shares is outstanding (the
"Registration Period"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been
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disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof as set forth in such Registration Statement. In the event the
number of shares available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registrable Securities, the
Company shall amend such Registration Statement, or file a new Registration
Statement (on the short form available therefor, if applicable), or both, so as
to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within fifteen (15) days after the necessity
therefor arises (based on the market price of the Common Stock and other
relevant factors on which the Company reasonably elects to rely). The Company
shall use it best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. For purposes of the foregoing provision, the number of shares available
under a Registration Statement shall be deemed "insufficient to cover all of the
Registrable Securities" if at any time the number of Registrable Securities
issued or issuable upon conversion of the Preferred Shares is greater than the
quotient determined by dividing (i) the number of shares of Common Stock
available for resale under such Registration Statement by (ii) 1.5. For purposes
of the calculation set forth in the foregoing sentence, any restrictions on the
convertibility of the Preferred Shares shall be disregarded and such calculation
shall assume that the Preferred Shares are then convertible and exercisable,
respectively, into shares of Common Stock at the then prevailing Conversion Rate
(as defined in the Company's Articles of Amendment).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge (i) promptly after the same is prepared and filed with the SEC at
least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits, the prospectus included in such Registration
Statement (including each preliminary prospectus) and, with regards to such
Registration Statement(s), any correspondence by or on behalf of the Company to
the SEC or the staff of the SEC and any correspondence from the SEC or the staff
of the SEC to the Company or its representatives, (ii) upon the effectiveness of
any Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as any
Investor reasonably requests, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be reasonably necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise
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be required to qualify but for this Section 3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify each
Investor who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threatening of any proceeding for such purpose.
e. In the event that the holders of Registrable Securities are
exercising their rights pursuant to Section 2(d) and Investors who hold a
majority of the Registrable Securities being offered in the offering select
underwriters for the offering, the Company shall enter into and perform its
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.
f. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor in writing of the happening of any event as a
result of which the prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission, and deliver ten (10)
copies of such supplement or amendment to each Investor (or such other number of
copies as such Investor may reasonably request). The Company shall also promptly
notify each Investor in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and when a Registration
Statement or any post-effective amendment has become effective (notification of
such effectiveness shall be delivered to each Investor by facsimile on the same
day of such effectiveness and by overnight mail), (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company's reasonable determination that
a post-effective amendment to a Registration Statement would be appropriate.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
h. The Company shall permit each Investor and a single firm of counsel,
initially Pryor Cashman Sherman & Flynn LLP or such other counsel as thereafter
designated as selling stockholders' counsel by the Investors who hold a majority
of the Registrable Securities being sold, to review and comment upon a
Registration Statement and all amendments and supplements thereto
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at least four (4) business days prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects. The Company
shall not submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto without the prior
approval of such counsel, which consent shall not be unreasonably withheld.
i. At the request of any Investor, the Company shall use its best
efforts to furnish to such Investor, on the date of the effectiveness of the
Registration Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) in the event that the holders of Registrable
Securities are exercising their rights pursuant to Section 2(d), if required by
an underwriter, a letter, dated such date, from the Company's independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, and (ii) an opinion, dated as of
such date, of counsel representing the Company for purposes of such Registration
Statement, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors, and (iv) one firm of attorneys retained by all
such underwriters (collectively, the "Inspectors") all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall hold in strict confidence and shall not make any
disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential.
k. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made
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generally available to the public other than by disclosure in violation of this
Agreement or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor, at
the Investor's expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.
l. The Company shall use its best efforts either to cause all the
Registrable Securities covered by a Registration Statement to be listed on the
NASDAQ SmallCap Market, NASDAQ National Market, the New York Stock Exchange or
the American Stock Exchange, Inc. or on each securities exchange on which
securities of the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, any managing underwriter
or underwriters, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case maybe, as the
managing underwriter or underwriters, if any, or, if there is no managing
underwriter or underwriters, the Investors may reasonably request and registered
in such names as the managing underwriter or underwriters, if any, or the
Investors may request.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
o. The Company shall provide a transfer agent and registrar for all
such Registrable Securities not later than the effective date of such
Registration Statement.
p. If requested by the managing underwriters or an Investor, the
Company shall (i) immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if requested by a shareholder or any underwriter of such Registrable Securities.
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q. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
r. The Company shall make generally available to its security holders
as soon as practical, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement.
s. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
t. Within two (2) business days after the Registration Statement which
includes the Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that the Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.
u. Notwithstanding anything to the contrary in Section 3(f), at any
time after the Registration Statement has been declared effective, the Company
may delay the disclosure of material, non-public information concerning the
Company the disclosure of which at the time is not, in the good faith opinion of
the Board of Directors of the Company and its counsel, in the best interest of
the Company and, in the opinion of counsel to the Company, otherwise required (a
"Grace Period"); provided, that the Company shall promptly (i) notify the
Investors in writing of the existence of material, non-public information giving
rise to a Grace Period and the date on which the Grace Period will begin, and
(ii) notify the Investors in writing of the date on which the Grace Period ends;
and, provided further, that during any consecutive 365 day period, there shall
be only one Grace Period, such Grace Period not to exceed 20 days (an "Allowable
Grace Period"). For purposes of determining the length of a Grace Period above,
the Grace Period shall begin on and include the date the Investors receive the
notice referred to in clause (i) above and shall end on and include the date
which is the earlier of (1) 20 days after the beginning of such Grace Period or
(2) the date the Investors receive the notice referred to in clause (ii) above.
The provisions of Section 2(c) of the Articles of Amendment shall not be
applicable during the period of any Allowable Grace Period. Upon expiration of
the Allowable Grace Period, the Company shall again be bound by the first
sentence of Section 3(f) with respect to the information giving rise thereto. In
the event of any Grace Period, the Mandatory Conversion Date (as defined in the
Articles of Amendment) shall be delayed one day for each day in the Grace Period
as provided in Section 2(h) of the Articles of Amendment.
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4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first anticipated filing date
of a Registration Statement, the Company shall notify each Investor in writing
of the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in such
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
c. In the event any Investor elects to participate in an underwritten
public offering pursuant to Section 2, each such Investor agrees to enter into
and perform such Investor's obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations and, if requested by the
underwriters, customary lock-up arrangements (on terms no more restrictive than
the lock-up arrangements applicable to the management of the Company), with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f).
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
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underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions and transfer taxes, incurred in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees, and fees and disbursements of counsel for the Company and fees
and disbursements of one counsel for the Investors, which fees shall not exceed
$3,000, shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, agents of,
and each Person, if any, who controls, any Investor within the meaning of the
1933 Act or the Securities Exchange Act of 1934, as amended (the"1934 Act"), and
any underwriter (as defined in the 1933 Act) for the Investors, and the
directors and officers of, and each Person, if any, who controls, any such
underwriter within the meaning of the 1933 Act or the 1934 Act (each,
an"Indemnified Person"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "Claims") incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("Indemnified Damages"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or
other"blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which the statements therein were
made, not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule
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or regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such underwriter or
controlling person, promptly as such expenses are incurred, subject to
documentation, if requested by the Company, and are due and payable, for any
legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c); (ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c), and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a violation and such Indemnified
Person, notwithstanding such advice, used it; (iii) shall not be available to
the extent such Claim is based on a failure of the Investor to deliver or to
cause to be delivered the prospectus made available by the Company; and (iv)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each Person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6(d), such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) and the agreement with respect to contribution contained in Section
7 shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
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Investor shall be liable under this Section 6(b) for only that amount of a Claim
or Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the Investor brings such untrue statement or omission of material fact
contained in the preliminary prospectus to the attention of the Company on a
timely basis.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and
another party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such counsel shall be selected by
Investors holding a majority-in-interest of the Registrable Securities included
in the Registration Statement to which the Claim relates, if the Investors are
entitled to indemnification hereunder, or the Company, if the Company is
entitled to indemnification hereunder, as applicable. The Indemnified Party or
Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of
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any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an Indemnifying Party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. For a period of two years from the last Closing Date make and keep
public information available, as those terms are understood and defined in Rule
144;
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b. File with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. Furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee will be subject to any
restrictions under the 1933 Act and applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
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<PAGE>
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically generated and kept on file by the sending
party); (iii) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company: Visual Data Corporation
1291 SW 29 Avenue
Pompano Beach, Florida 33069
Telephone: (954) 917-6655
Facsimile: (954) 917-6660
Attention: Randy S. Selman
With a copy to: Atlas Pearlman Trop & Borkson, P.A.
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, Florida 33301
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
Attention: Joel D. Mayersohn, Esq.
If to a Buyer: To its address and facsimile number
on the Schedule of Buyers attached
hereto, with copies to such Buyer's
counsel as set forth on the Schedule
of Buyers.
Each party shall provide five (5) days prior notice to the other party of any
change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
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<PAGE>
d. The corporate laws of the State of Florida shall govern all issues
concerning the relative rights of the Company and its stockholders. All other
questions regarding the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York without regard to the principles of conflict of laws. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting the City of New York, Borough of Manhattan, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. 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 to such party at the
address for such 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. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein and
other than those set forth in the Articles of Amendment. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall inure
to the benefit of and be binding upon the permitted successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
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<PAGE>
j. All consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Investors holding a majority of the Registrable Securities,
determined as if all of the Preferred Shares then outstanding have been
converted into Registrable Securities.
k. 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.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
VISUAL DATA CORPORATION WEC INVESTORS IV LLC
By: /s/ Randy S. Selman
- ----------------------- By:________________________
Name: Randy S. Selman Name:______________________
Its: President Its:_______________________
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<PAGE>
SCHEDULE OF BUYERS
Number of Number of
Investor Name and Address Preferred Shares Warrants
------------------------- ---------------- ---------
WEC Investors IV LLC 150 20,000
c/o West End Capital LLC
a Delaware limited liability company
One World Trade Center
Suite 4563
New York, NY 10048
Attention: Daniel J. Saks
With a copy to:
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
10th Floor
New York, NY 10022
Attention: Mark Saks
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn:
Re: VISUAL DATA CORPORATION
-----------------------
Ladies and Gentlemen:
We are counsel to VISUAL DATA CORPORATION, a Florida corporation
(the"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "Purchase Agreement") entered into by and
among the Company and the Buyers named therein (collectively, the "Holders")
pursuant to which the Company issued to the Holders shares of its Series A
Convertible Preferred Stock, par value $0.0001 per share, (the "Preferred
Shares") and warrants to purchase shares of Common Stock of the Company (the
"Warrants"). Pursuant to the Purchase Agreement, the Company also has entered
into a Registration Rights Agreement with the Holders (the "Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of the Common Stock of the Company, par value
$0.0001 per share (the "Common Stock") issuable upon conversion of the Preferred
Shares and exercise of the Warrants, under the Securities Act of 1933, as
amended (the "1933 Act"). In connection with the Company's obligations under the
Registration Rights Agreement, on ____________ ___, 1998, the Company filed a
Registration Statement on Form _____ (File No. 333- _____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[Company Counsel]
By:________________________
cc: [LIST NAMES OF HOLDERS]
