EXECUTION VERSION
PIPELINE DATA INC.
SECURITIES PURCHASE AGREEMENT
February 27, 2004
Table of Contents
Page
1. Agreement to Sell and Purchase........................................1
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2. Fees and Warrant......................................................1
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3. Closing, Delivery and Payment.........................................2
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3.1 Closing....................................................2
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3.2 Delivery...................................................2
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4. Representations and Warranties of the Company.........................2
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4.1 Organization, Good Standing and Qualification..............2
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4.2 Subsidiaries...............................................3
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4.3 Capitalization; Voting Rights..............................3
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4.4 Authorization; Binding Obligations.........................4
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4.5 Liabilities................................................4
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4.6 Agreements; Action.........................................4
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4.7 Obligations to Related Parties.............................5
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4.8 Changes....................................................6
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4.9 Title to Properties and Assets; Liens, Etc.................7
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4.10 Intellectual Property......................................7
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4.11 Compliance with Other Instruments..........................8
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4.12 Litigation.................................................8
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4.13 Tax Returns and Payments...................................8
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4.14 Employees..................................................9
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4.15 Registration Rights and Voting Rights......................9
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4.16 Compliance with Laws; Permits..............................9
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4.17 Environmental and Safety Laws.............................10
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4.18 Valid Offering............................................10
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4.19 Full Disclosure...........................................10
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4.20 Insurance.................................................10
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4.21 SEC Reports...............................................10
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4.22 Listing...................................................11
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4.23 No Integrated Offering....................................11
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4.24 Stop Transfer.............................................11
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4.25 Dilution. ................................................11
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4.26 Patriot Act...............................................11
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5. Representations and Warranties of the Purchaser......................12
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5.1 No Shorting...............................................12
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5.2 Requisite Power and Authority.............................12
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5.3 Investment Representations................................12
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5.4 Purchaser Bears Economic Risk.............................13
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5.5 Acquisition for Own Account...............................13
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5.6 Purchaser Can Protect Its Interest........................13
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5.7 Accredited Investor.......................................13
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5.8 Legends...................................................13
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6. Covenants of the Company.............................................14
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6.1 Stop-Orders...............................................14
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6.2 Listing...................................................15
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6.3 Market Regulations........................................15
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6.4 Reporting Requirements....................................15
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6.5 Use of Funds..............................................15
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6.6 Access to Facilities......................................15
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6.7 Taxes.....................................................15
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6.8 Insurance.................................................16
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6.9 Intellectual Property.....................................17
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6.10 Properties................................................17
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6.11 Confidentiality...........................................17
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6.12 Required Approvals........................................17
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6.13 Reissuance of Securities..................................18
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6.14 Opinion...................................................18
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7. Covenants of the Purchaser...........................................18
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7.1 Confidentiality...........................................18
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7.2 Non-Public Information....................................18
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8. Covenants of the Company and Purchaser Regarding Indemnification.....18
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8.1 Company Indemnification...................................18
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8.2 Purchaser's Indemnification...............................19
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8.3 Procedures................................................19
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9. Conversion of Convertible Note.......................................19
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9.1 Mechanics of Conversion...................................19
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9.2 Maximum Conversion........................................20
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10. Registration Rights, Indemnification.................................21
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10.1 Registration Rights Granted...............................21
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10.2 Indemnification...........................................21
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10.3 Offering Restrictions.....................................23
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11. Miscellaneous........................................................23
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11.1 Governing Law.............................................23
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11.2 Survival..................................................23
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11.3 Successors................................................23
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11.4 Entire Agreement..........................................24
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11.5 Severability..............................................24
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11.6 Amendment and Waiver......................................24
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11.7 Delays or Omissions.......................................24
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11.8 Notices...................................................24
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11.9 Attorneys' Fees...........................................25
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11.10 Titles and Subtitles......................................25
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11.11 Facsimile Signatures; Counterparts........................26
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11.12 Broker's Fees.............................................26
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11.13 Construction..............................................26
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LIST OF EXHIBITS
Form of Convertible Term Note..................................... Exhibit A
Form of Warrant................................................... Exhibit B
Form of Opinion................................................... Exhibit C
Form of Escrow Agreement.......................................... Exhibit D
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of February 27, 2004, by and between PIPELINE DATA INC., a Delaware
corporation (the "Company"), and Laurus Master Fund, Ltd., a Cayman Islands
company (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of
Convertible Term Note in the aggregate principal amount of Two Million Dollars
($2,000,000.00) (the "Note"), which Note is convertible into shares of the
Company's common stock, $0.001 par value per share (the "Common Stock") at a
fixed conversion price of $1.00 per share of Common Stock ("Fixed Conversion
Price");
WHEREAS, the Company wishes to issue a warrant to the Purchaser to purchase
up to 500,000 shares of the Company's Common Stock in connection with
Purchaser's purchase of the Note;
WHEREAS, Purchaser desires to purchase the Note and Warrant on the terms
and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, Note in the aggregate amount of $2,000,000
convertible in accordance with the terms thereof into shares of the Company's
Common Stock in accordance with the terms of the Note and this Agreement. The
Note purchased on the Closing Date shall be known as the "Offering." A form of
the Note is annexed hereto as Exhibit A. The Note will have a Maturity Date
thirty six (36) months from the date hereof. Collectively, the Note and Warrant
(as defined in Section 2) and Common Stock issuable in payment of the Note, upon
conversion of the Note and upon exercise of the Warrant are referred to as the
"Securities."
2. Fees; Warrant. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser a Warrant to
purchase up to 500,000 shares of Common Stock in connection with the
Offering (the "Warrant") pursuant to Section 1 hereof. The Warrant
must be delivered on the Closing Date. A form of Warrant is annexed
hereto as Exhibit B. All the representations, covenants, warranties,
undertakings, and indemnification, and other rights made or granted to
or for the benefit of the Purchaser by the Company are hereby also
made and granted in respect of the Warrant and shares of the Company's
Common Stock issuable upon exercise of the Warrant (the "Warrant
Shares").
(b) Subject to the terms of Section 2(d) below, the Company shall pay to
Laurus Capital Management, LLC, manager of Purchaser a closing payment
in an amount equal to $105,000. The foregoing fee is referred to
herein as the "Closing Payment."
(c) The Company shall reimburse the Purchaser for its reasonable legal
fees for services rendered to the Purchaser in preparation of this
Agreement and the Related Agreements (as hereinafter defined), and
expenses in connection with the Purchaser's due diligence review of
the Company and relevant matters. Total due diligence fees shall not
exceed $17,500, excluding any costs related to required third-party
appraisals or extraordinary due diligence as may be mutually agreed to
by the Purchaser and the Company. Legal expenses shall be $22,000.
Amounts required to be paid hereunder will be paid at the Closing.
(d) The Closing Payment, legal fees and due diligence fees (net of
deposits previously paid by the Company shall be paid at closing out
of funds held pursuant to a Funds Escrow Agreement of even date
herewith among the Company, Purchaser, and an Escrow Agent (the "Funds
Escrow Agreement") and a disbursement letter (the "Disbursement
Letter").
3. Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the closing of
the transactions contemplated hereby (the "Closing"), shall take place
on the date hereof, at such time or place as the Company and Purchaser
may mutually agree (such date is hereinafter referred to as the
"Closing Date").
3.2 Delivery. Pursuant to the Funds Escrow Agreement in the form attached
hereto as Exhibit D, at the Closing on the Closing Date, the Company
will deliver to the Purchaser, among other things, a Note in the form
attached as Exhibit A representing the principal amount of $2,000,000
and a Warrant in the form attached as Exhibit B in the Purchaser's
name representing 500,000 Warrant Shares and the Purchaser will
deliver to the Company, among other things, the amounts set forth in
the Disbursement Letter by certified funds or wire transfer.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as of the date of this Agreement as set
forth below which disclosures are supplemented by, and subject to the Company's
filings under the Securities Exchange Act of 1934 (collectively, the "Exchange
Act Filings"), copies of which have been provided to the Purchaser.
4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has the corporate
power and authority to own and operate its properties and assets, to
execute and deliver this Agreement, and the Note and the Warrant to be
issued in connection with this Agreement, the Security Agreement
relating to the Note dated as of February 27, 2004 between the Company
and the Purchaser, the Registration Rights Agreement relating to the
Securities dated as of February 27, 2004 between the Company and the
Purchaser and all other agreements referred to herein (collectively,
the "Related Agreements"), to issue and sell the Note and the shares
of Common Stock issuable upon conversion of the Note (the "Note
Shares"), to issue and sell the Warrant and the Warrant Shares, and to
carry out the provisions of this Agreement and the Related Agreements
and to carry on its business as presently conducted. The Company is
duly qualified and is authorized to do business and is in good
standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased)
makes such qualification necessary, except for those jurisdictions in
which failure to do so would not have a material adverse effect on the
Company or its business.
4.2 Subsidiaries. The Company owns a majority of the issued and
outstanding capital stock of ▇▇▇▇▇▇▇▇▇.▇▇▇, ------------ Inc. and
Northern Merchant Services, Inc. The Company does not own or control
any equity security or other interest of any other corporation,
limited partnership or other business entity.
4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, as of the date hereof
consists of 100,000,000 shares, of which 95,000,000 are shares of
Common Stock, par value $0.001 per share, 13,045,674 shares of which
are issued and outstanding as of September 30, 2003, and 5,000,000 are
shares of preferred stock, par value $0.001 per share of which 5,000
shares of Preferred Stock, par value $.001 per share are issued and
outstanding.
(b) Except as disclosed on Schedule 4.3, other than: (i) the shares
reserved for issuance under the Company's stock option plans; (ii)
shares which may be granted pursuant to this Agreement and the Related
Agreements, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or arrangements or
agreements of any kind for the purchase or acquisition from the
Company of any of its securities. Except as disclosed on Schedule 4.3,
neither the offer, issuance or sale of any of the Note or Warrant, or
the issuance of any of the Note Shares or Warrant Shares, nor the
consummation of any transaction contemplated hereby will result in a
change in the price or number of any securities of the Company
outstanding, under anti-dilution or other similar provisions contained
in or affecting any such securities.
(c) All issued and outstanding shares of the Company's Common Stock: (i)
have been duly authorized and validly issued and are fully paid and
nonassessable; and (ii) were issued in compliance with all applicable
state and federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the shares of
the Common Stock are as stated in the Company's Certificate of
Incorporation (the "Charter"). The Note Shares and Warrant Shares have
been duly and validly reserved for issuance. When issued in compliance
with the provisions of this Agreement and the Company's Charter, the
Securities will be validly issued, fully paid and nonassessable, and
will be free of any liens or encumbrances; provided, however, that the
Securities may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise
required by such laws at the time a transfer is proposed.
4.4 Authorization; Binding Obligations. All corporate action on the part of
the Company, its officers and directors necessary for the authorization of this
Agreement and the Related Agreements, the performance of all obligations of the
Company hereunder at the Closing and, the authorization, sale, issuance and
delivery of the Note and Warrant has been taken or will be taken prior to the
Closing. The Agreement and the Related Agreements, when executed and delivered
and to the extent it is a party thereto, will be valid and binding obligations
of the Company enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement
of creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
The sale of the Note and the subsequent conversion of the Note into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the subsequent exercise of the Warrant for Warrant Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
4.5 Liabilities. The Company, to the best of its knowledge, has no material
contingent liabilities, except current liabilities incurred in the ordinary
course of business and liabilities disclosed in any Securities Act or Exchange
Act Filings.
4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as disclosed
in any Exchange Act Filings:
(a) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which
may involve: (i) obligations (contingent or otherwise) of, or payments
to, the Company in excess of $50,000 (other than obligations of, or
payments to, the Company arising from purchase or sale agreements
entered into in the ordinary course of business); or (ii) the transfer
or license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than licenses arising from the
purchase of "off the shelf" or other standard products) (except in the
case of that certain suit in the United States District Court of
Arizona by Net MoneyIn, Inc. (Plaintiff) v. Melon Financial Corp. et
al., (defendants) (case no CV-01-401-TUC-RCC); or (iii) provisions
restricting the development, manufacture or distribution of the
Company's products or services; or (iv) indemnification by the Company
with respect to infringements of proprietary rights.
(b) Since September 30, 2003, the Company has not: (i) declared or paid
any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock; (ii) incurred any
indebtedness for money borrowed or any other liabilities (other than
ordinary course obligations) individually in excess of $50,000 or, in
the case of indebtedness and/or liabilities individually less than
$50,000, in excess of $100,000 in the aggregate; (iii) made any loans
or advances to any person not in excess, individually or in the
aggregate, of $100,000, other than ordinary advances for travel
expenses; or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary
course of business.
(c) For the purposes of subsections (a) and (b) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and
proposed transactions involving the same person or entity (including
persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
4.7 Obligations to Related Parties. Except as set forth on Schedule 4.7,
there are no obligations of the Company to officers, directors, stockholders or
employees of the Company other than:
(a) for payment of salary for services rendered and for bonus payments;
(b) reimbursement for reasonable expenses incurred on behalf of the
Company;
(c) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any
stock option plan approved by the Board of Directors of the Company);
and
(d) obligations listed in the Company's financial statements or disclosed
in any of its Exchange Act Filings.
Except as described above, or in the case of ▇▇▇▇▇ ▇▇▇▇▇▇'▇ loan from the
Company in the amount of $85,000, which loan shall be repaid upon the Closing as
an initial draw down from this loan facility or set forth on Schedule 4.7, none
of the officers, directors or, to the best of the Company's knowledge, key
employees or stockholders of the Company or any members of their immediate
families, are indebted to the Company, individually or in the aggregate, in
excess of $50,000 or have any direct or indirect ownership interest in any firm
or corporation with which the Company is affiliated or with which the Company
has a business relationship, or any firm or corporation which competes with the
Company, other than passive investments in publicly traded companies
(representing less than one percent (1%) of such company) which may compete with
the Company. Except as described above, no officer, director or stockholder, or
any member of their immediate families, is, directly or indirectly, interested
in any material contract with the Company and no agreements, understandings or
proposed transactions are contemplated between the Company and any such person.
Except as set forth on Schedule 4.7, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
4.8 Changes. Since September 30, 2003, except as disclosed in any Security
Act or Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) Any change in the assets, liabilities, financial condition, prospects
or operations of the Company, other than changes in the ordinary
course of business, none of which individually or in the aggregate has
had or is reasonably expected to have a material adverse effect on
such assets, liabilities, financial condition, prospects or operations
of the Company;
(b) Any resignation or termination of any officer, key employee or group
of employees of the Company;
(c) Any material change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material debt
owed to it;
(f) Any direct or indirect material loans made by the Company to any
stockholder, employee, officer or director of the Company, other than
advances made in the ordinary course of business;
(g) Any material change in any compensation arrangement or agreement with
any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other distribution of
the assets of the Company;
(i) Any labor organization activity related to the Company;
(j) Any debt, obligation or liability incurred, assumed or guaranteed by
the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is a party
or by which it is bound which may materially and adversely affect the
business, assets, liabilities, financial condition, operations or
prospects of the Company;
(m) Any other event or condition of any character that, either
individually or cumulatively, has or may materially and adversely
affect the business, assets, liabilities, financial condition,
prospects or operations of the Company; or
(n) Any arrangement or commitment by the Company to do any of the acts
described in subsection (a) through (m) above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set forth on
Schedule 4.9, the Company has good and marketable title to its properties and
assets, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than:
(a) those resulting from taxes which have not yet become delinquent;
(b) minor liens and encumbrances which do not materially detract from the
value of the property subject thereto or materially impair the
operations of the Company; and
(c) those that have otherwise arisen in the ordinary course of business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company are in good operating condition and repair
and are reasonably fit and usable for the purposes for which they are being
used. Except as set forth on Schedule 4.9, the Company is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.
4.10 Intellectual Property.
(a) The Company owns or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes
necessary for its business as now conducted and to the Company's
knowledge as presently proposed to be conducted (the "Intellectual
Property"), without any known infringement of the rights of others
(except in the case of that certain suit in the United States District
Court of Arizona by Net MoneyIn, Inc. (Plaintiff) v. Melon Financial
Corp. et al., (defendants) (case no CV-01-401-TUC-RCC). There are no
outstanding options, licenses or agreements of any kind relating to
the foregoing proprietary rights, nor is the Company bound by or a
party to any options, licenses or agreements of any kind with respect
to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and
processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard
products.
(b) The Company has not received any communications alleging that the
Company has violated any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights
of any other person or entity, nor is the Company aware of any basis
therefor (except in the case of that certain suit in the United States
District Court of Arizona by Net MoneyIn, Inc. (Plaintiff) v. Melon
Financial Corp. et al., (defendants) (case no CV-01-401-TUC-RCC).
(c) The Company does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been
rightfully assigned to the Company.
4.11 Compliance with Other Instruments. Except as set forth on Schedule
4.11, the Company is not in violation or default of any term of its Charter or
Bylaws, or of any material provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is party or by which it is bound
or of any judgment, decree, order or writ. The execution, delivery and
performance of and compliance with this Agreement and the Related Agreements to
which it is a party, and the issuance and sale of the Note by the Company and
the other Securities by the Company each pursuant hereto, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
4.12 Litigation. Except as set forth on Schedule 4.12 hereto, there is no
action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company that prevents the Company to
enter into this Agreement or the Related Agreements, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for any of the foregoing. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
4.13 Tax Returns and Payments. The Company has timely filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and to the Company's
knowledge all other taxes due and payable by the Company on or before the
Closing, have been paid or will be paid prior to the time they become
delinquent. Except as set forth on Schedule 4.13, the Company has not been
advised:
(a) that any of its returns, federal, state or other, have been or are
being audited as of the date hereof; or
(b) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 Employees. Except as set forth on Schedule 4.14, the Company has no
collective bargaining agreements with any of its employees. There is no labor
union organizing activity pending or, to the Company's knowledge, threatened
with respect to the Company. Except as disclosed in the Exchange Act Filings or
on Schedule 4.14, the Company is not a party to or bound by any currently
effective employment contract, deferred compensation arrangement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. To the Company's knowledge, no employee of the
Company, nor any consultant with whom the Company has contracted, is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company because of the nature of the
business to be conducted by the Company; and to the Company's knowledge the
continued employment by the Company of its present employees, and the
performance of the Company's contracts with its independent contractors, will
not result in any such violation. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to the Company. The Company has not received any notice alleging
that any such violation has occurred. Except for employees who have a current
effective employment agreement with the Company, no employee of the Company has
been granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. Except as set
forth on Schedule 4.14, the Company is not aware that any officer, key employee
or group of employees intends to terminate his, her or their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.
4.15 Registration Rights and Voting Rights. Except as set forth on Schedule
4.15 and except as disclosed in Securities Act or Exchange Act Filings, the
Company is presently not under any obligation, and has not granted any rights,
to register any of the Company's presently outstanding securities or any of its
securities that may hereafter be issued. Except as set forth on Schedule 4.15
and except as disclosed in Securities Act or Exchange Act Filings, to the
Company's knowledge, no stockholder of the Company has entered into any
agreement with respect to the voting of equity securities of the Company.
4.16 Compliance with Laws; Permits. Except as set forth on Schedule 4.16,
to its knowledge, the Company is not in violation in any material respect of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement and the issuance of any of the
Securities, except such as has been duly and validly obtained or filed, or with
respect to any filings that must be made after the Closing, as will be filed in
a timely manner. The Company has all material franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would materially and adversely affect the
business, properties, prospects or financial condition of the Company.
4.17 Environmental and Safety Laws. The Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation. Except as set forth on Schedule 4.17, no Hazardous Materials (as
defined below) are used or have been used, stored, or disposed of by the Company
or, to the Company's knowledge, by any other person or entity on any property
owned, leased or used by the Company. For the purposes of the preceding
sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as "hazardous" or
"toxic" under any applicable local, state, federal and/or foreign laws
and regulations that govern the existence and/or remedy of
contamination on property, the protection of the environment from
contamination, the control of hazardous wastes, or other activities
involving hazardous substances, including building materials; or
(b) any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.19 Full Disclosure. The Company has provided the Purchaser with all
information requested by the Purchaser in connection with its decision to
purchase the Note and Warrant, including all information the Company believes is
reasonably necessary to make such investment decision. Neither this Agreement,
the exhibits and schedules hereto, the Related Agreements nor any other document
delivered by the Company to Purchaser or its attorneys or agents in connection
herewith or therewith or with the transactions contemplated hereby or thereby,
to the best of our knowledge contain any untrue statement of a material fact nor
omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading. Any financial projections and other estimates provided to
the Purchaser by the Company were based on the Company's experience in the
industry and on assumptions of fact and opinion as to future events which the
Company, at the date of the issuance of such projections or estimates, believed
to be reasonable.
4.20 Insurance. The Company has general commercial, product liability, fire
and casualty insurance policies with coverages which the Company believes are
customary for companies similarly situated to the Company in the same or similar
business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company has
filed all proxy statements, reports and other documents required to be filed by
it under the Exchange Act. The Company has furnished the Purchaser with copies
of: (i) its Annual Report on Form 10-KSB for the fiscal year ended December 31,
2002; and (ii) its Quarterly Reports on Form 10-QSB for the fiscal quarters
ended March 31, 2003, June 30, 2003 and September 30, 2003, and the Form 8-K
filings which it has made during 2003 to date (collectively, the "SEC Reports").
Except as set forth on Schedule 4.21, each SEC Report was, at the time of its
filing, in substantial compliance with the requirements of its respective form
and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any untrue statement of a material fact or omitted 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.
4.22 Listing. The Company's Common Stock, Class A Warrants and Class B
Warrants (collectively, the "Traded Securities") are all listed for trading on
the National Association of Securities Dealers, Inc. Over the Counter Bulletin
Board ("NASD OTCBB") and each of the Traded Securities satisfies all
requirements for the continuation of such listings. The Company has not received
any notice that any of its Traded Securities will be delisted from NASD OTCBB or
that any of its Traded Securities do not meet all requirements for listing.
4.23 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Rule 506 under the Securities Act, or
any applicable exchange-related stockholder approval provisions, nor will the
Company or any of its affiliates or subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other
offerings.
4.24 Stop Transfer. The Securities are restricted securities as of the date
of this Agreement. The Company will not issue any stop transfer order or other
order impeding the sale and delivery of any of the Securities at such time as
the Securities are registered for public sale or an exemption from registration
is available, except as required by state and federal securities laws.
4.25 Dilution. The Company specifically acknowledges that its obligation to
issue the shares of Common Stock upon conversion of the Note and exercise of the
Warrant is binding upon the Company and enforceable regardless of the dilution
such issuance may have on the ownership interests of other shareholders of the
Company.
4.26 Patriot Act. If the Company is a corporation, trust, partnership,
limited liability Purchaser or other organization, the Company certifies that,
to the best of Company's knowledge, the Company has not been designated, and is
not owned or controlled, by a "suspected terrorist" as defined in Executive
Order 13224. The Company hereby acknowledges that the Purchaser seeks to comply
with all applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Company hereby represents, warrants and agrees
that: (i) none of the cash or property that the Company will pay or will
contribute to the Purchaser has been or shall be derived from, or related to,
any activity that is deemed criminal under United States law; and (ii) no
contribution or payment by the Company to the Purchaser, to the extent that they
are within the Company's control shall cause the Purchaser to be in violation of
the United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Company shall
promptly notify the Purchaser if any of these representations ceases to be true
and accurate regarding the Company. The Company agrees to provide the Purchaser
any additional information regarding the Company that the Purchaser deems
necessary or convenient to ensure compliance with all applicable laws concerning
money laundering and similar activities. The Company understands and agrees that
if at any time it is discovered that any of the foregoing representations are
incorrect, or if otherwise required by applicable law or regulation related to
money laundering similar activities, the Purchaser may undertake appropriate
actions to ensure compliance with applicable law or regulation, including but
not limited to segregation and/or redemption of the Company's investment in the
Purchaser. The Company further understands that the Purchaser may release
confidential information about the Company and, if applicable, any underlying
beneficial owners, to proper authorities if the Purchaser, in its sole
discretion, determines that it is in the best interests of the Purchaser in
light of relevant rules and regulations under the laws set forth in subsection
(ii) above.
5. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement)
5.1 No Shorting. The Purchaser or any of its affiliates and investment
partners has not, will not and will not cause any person or entity,
directly or indirectly, to engage in "short sales" of the Company's
Traded Securities or any other hedging strategies as long as the Note
shall be outstanding.
5.2 Requisite Power and Authority. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out
their provisions. All corporate action on Purchaser's part required
for the lawful execution and delivery of this Agreement and the
Related Agreements have been or will be effectively taken prior to the
Closing. Upon their execution and delivery, this Agreement and the
Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting
enforcement of creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 Investment Representations. Purchaser understands that the Securities
are being offered and sold pursuant to an exemption from registration contained
in the Securities Act based in part upon Purchaser's representations contained
in the Agreement, including, without limitation, that the Purchaser is an
"accredited investor" within the meaning of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). The Purchaser confirms that it
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Note and the Warrant to be purchased by it under this Agreement and the Note
Shares and the Warrant Shares acquired by it upon the conversion of the Note and
the exercise of the Warrant, respectively. The Purchaser further confirms that
it has had an opportunity to ask questions and receive answers from the Company
regarding the Company's business, management and financial affairs and the terms
and conditions of the Offering, the Note, the Warrant and the Securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Purchaser or to which the
Purchaser had access.
5.4 Purchaser Bears Economic Risk. Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Purchaser must bear the economic risk of this investment until
the Securities are sold pursuant to: (i) an effective registration statement
under the Securities Act; or (ii) an exemption from registration is available
with respect to such sale.
5.5 Acquisition for Own Account. Purchaser is acquiring the Note and
Warrant and the Note Shares and the Warrant Shares for Purchaser's own account
for investment only, and not as a nominee or agent and not with a view towards
or for resale in connection with their distribution.
5.6 Purchaser Can Protect Its Interest. Purchaser represents that by reason
of its, or of its management's, business and financial experience, Purchaser has
the capacity to evaluate the merits and risks of its investment in the Note, the
Warrant and the Securities and to protect its own interests in connection with
the transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement or the Related Agreements.
5.7 Accredited Investor. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
5.8 Legends.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE COMMON
STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO PIPELINE DATA INC. THAT SUCH REGISTRATION
IS NOT REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by DWAC
system (as hereinafter defined), shall bear a legend which shall
be in substantially the following form until such shares are
covered by an effective registration statement filed with the
SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO PIPELINE DATA INC. THAT
SUCH REGISTRATION IS NOT REQUIRED."
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE
COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING
SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PIPELINE DATA
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with the
Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly after it
receives notice of issuance by the Securities and Exchange Commission
(the "SEC"), any state securities commission or any other regulatory
authority of any stop order or of any order preventing or suspending
any offering of any securities of the Company, or of the suspension of
the qualification of the Common Stock of the Company for offering or
sale in any jurisdiction, or the initiation of any proceeding for any
such purpose.
6.2 Listing. The Company shall promptly secure the listing of the shares
of Common Stock issuable upon conversion of the Note and upon the
exercise of the Warrant on the NASD OTCBB (the "Principal Market")
upon which shares of Common Stock are listed (subject to official
notice of issuance) and shall maintain such listing so long as any
other shares of Common Stock shall be so listed. The Company will
maintain the listing of its Common Stock on the Principal Market, and
will comply in all material respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the National
Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD and
applicable state authorities, in accordance with their requirements,
of the transactions contemplated by this Agreement, and shall take all
other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities to Purchaser and promptly provide
copies thereof to Purchaser.
6.4 Reporting Requirements. The Company will timely file with the SEC all
reports required to be filed pursuant to the Exchange Act and refrain
from terminating its status as an issuer required by the Exchange Act
to file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination.
6.5 Use of Funds. The Company agrees that it will use the proceeds of the
sale of the Note and Warrant for debt reduction and working capital
purposes only.
6.6 Access to Facilities. The Company will permit any representatives
designated by the Purchaser (or any successor of the Purchaser), upon
reasonable notice and during normal business hours, at such person's
expense and accompanied by a representative of the Company, to:
(a) visit and inspect any of the properties of the Company;
(b) examine the corporate and financial records of the Company
(unless such examination is not permitted by federal, state or
local law or by contract) and make copies thereof or extracts
therefrom; and
(c) discuss the affairs, finances and accounts of the Company with
the directors, officers and independent accountants of the
Company.
Notwithstanding the foregoing, the Company will not provide any
material, non-public information to the Purchaser unless the Purchaser
signs a confidentiality agreement and otherwise complies with
Regulation FD, under the federal securities laws.
6.7 Taxes. The Company will promptly pay and discharge, or cause to be
paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company; provided,
however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company shall have set
aside on its books adequate reserves with respect thereto, and
provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefor.
6.8 Insurance. The Company will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured
against by companies in similar business similarly situated as the
Company; and the Company will maintain, with financially sound and
reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner
which the Company reasonably believes is customary for companies in
similar business similarly situated as the Company and to the extent
available on commercially reasonable terms. The Company and each of
its subsidiaries set forth in Section 4.2 hereof (the "Subsidiaries")
will jointly and severally bear the full risk of loss from any loss of
any nature whatsoever with respect to the assets pledged to the
Purchaser as security for its obligations hereunder and under the
Related Agreements. At the Company's own cost and expense in amounts
and with carriers reasonably acceptable to Purchaser, the Company and
each of the Subsidiaries shall (i) keep all its insurable properties
and properties in which it has an interest insured against the hazards
of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to
the Company's or the respective Subsidiary's including business
interruption insurance; (ii) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses similar to
the Company's or the Subsidiaries' insuring against larceny,
embezzlement or other criminal misappropriation of insured's officers
and employees who may either singly or jointly with others at any time
have access to the assets or funds of the Company either directly or
through governmental authority to draw upon such funds or to direct
generally the disposition of such assets; (iii) maintain public and
product liability insurance against claims for personal injury, death
or property damage suffered by others; (iv) maintain all such worker's
compensation or similar insurance as may be required under the laws of
any state or jurisdiction in which the Company or the Subsidiaries are
engaged in business; and (v) furnish Purchaser with (x) copies of all
policies and evidence of the maintenance of such policies at least
thirty (30) days before any expiration date, (y) excepting the
Company's workers' compensation policy, endorsements to such policies
naming Purchaser as "co-insured" or "additional insured" and
appropriate loss payable endorsements in form and substance
satisfactory to Purchaser, naming Purchaser as loss payee within five
(5) days after Closing, and (z) evidence that as to Purchaser the
insurance coverage shall not be impaired or invalidated by any act or
neglect of the Company or any of its Subsidiaries and the insurer will
provide Purchaser with at least thirty (30) days notice prior to
cancellation. The Company and each of its Subsidiaries shall instruct
the insurance carriers that in the event of any loss thereunder, the
carriers shall make payment for such loss to the Company and/or any of
the Subsidiaries and Purchaser jointly. In the event that as of the
date of receipt of each loss recovery upon any such insurance, the
Purchaser has not declared an event of default with respect to this
Agreement or any of the Related Agreements, then the Company shall be
permitted to direct the application of such loss recovery proceeds
toward investment in property, plant and equipment that would comprise
"Collateral" secured by Purchaser's security interest pursuant to its
security agreement, with any surplus funds to be applied toward
payment of the obligations of the Company to Purchaser. In the event
that Purchaser has properly declared an event of default with respect
to this Agreement or any of the Related Agreements, then all loss
recoveries received by Purchaser upon any such insurance thereafter
may be applied to the obligations of the Company hereunder and under
the Related Agreements, in such order as the Purchaser may determine.
Any surplus (following satisfaction of all Company obligations to
Purchaser) shall be paid by Purchaser to the Company or applied as may
be otherwise required by law. Any deficiency thereon shall be paid by
the Company or any of the Subsidiaries, as applicable, to Purchaser,
on demand.
6.9 Intellectual Property. The Company shall maintain in full force and
effect its corporate existence, rights and franchises and all licenses
and other rights to use Intellectual Property owned or possessed by it
and reasonably deemed to be necessary to the conduct of its business.
6.10 Properties. The Company will keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and
from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will
at all times comply with each provision of all leases to which it is a
party or under which it occupies property if the breach of such
provision could reasonably be expected to have a material adverse
effect.
6.11 Confidentiality. Neither the Company nor the Purchaser shall disclose,
and shall not include in any public announcement, the name of either
party unless expressly agreed to by both parties or unless and until
such disclosure is required by law or applicable regulation, and then
only to the extent of such requirement. The Company may disclose
Purchaser's identity and the terms of this Agreement to its current
and prospective debt and equity financing sources.
6.12 Required Approvals. For so long as fifty percent (50%) of the
aggregate principal amount of the Note is outstanding, the Company,
without the prior written consent of the Purchaser, shall not:
(a) directly or indirectly declare or pay any dividends, other than
dividends with respect to its preferred stock;
(b) liquidate, dissolve or effect a material reorganization;
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument
which by its terms would (under any circumstances) restrict the
Company's right to perform the provisions of this Agreement or
any of the agreements contemplated thereby;
(d) materially alter or change the scope of the business of the
Company;
(e) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the
purchase of equipment (not in excess of ten percent (10%) per
annum of the Company's assets) whether secured or unsecured other
than the Company's indebtedness to Laurus and as set forth on
Schedule 6.12(e) attached hereto and made a part hereof or any
refinancings or replacements thereof or any debt incurred in
connection with the purchase of assets or in connection with
operating lines of credit as necessary to operate such assets, or
any refinancings or replacements thereof; (ii) cancel any debt
owing to it in excess of $50,000 in the aggregate during any 12
month period; (iii) assume, guarantee, endorse or otherwise
become directly or contingently liable in connection with any
obligations of any other Person, except the endorsement of
negotiable instruments by a Company for deposit or collection or
similar transactions in the ordinary course of business or
guarantees provided to any of the lenders set forth in
subparagraph (i) immediately above.
6.13 Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Section
5.7 above at such time as:
(a) the holder thereof is permitted to dispose of such Securities
pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement after
such Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
6.14 Opinion. On the Closing Date, the Company will deliver to the
Purchaser an opinion in the form attached hereto as Exhibit C. The
Company will provide, at the Company's expense, such other legal
opinions in the future as are reasonably necessary for the conversion
of the Note and exercise of the Warrant.
6.15 Customer Notification Form. In the event of a default of the Secured
Convertible Term Note, the Company will execute and deliver the
Customer Notification letter in the Form attached as Exhibit E.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
Company as follows:
7.1 Confidentiality. The Purchaser agrees that it will not disclose, and
will not include in any public announcement, the name of the Company,
unless expressly agreed to by the Company or unless and until such
disclosure is required by law or applicable regulation, and then only
to the extent of such requirement.
7.2 Non-Public Information. The Purchaser agrees not to effect any sales
in the shares of the Company's Common Stock while in possession of
material, non-public information regarding the Company if such sales
would violate applicable securities law.
8. Covenants of the Company and Purchaser Regarding Indemnification.
8.1 Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend Purchaser, each of Purchaser's
officers, directors, agents, affiliates, control persons, and
principal shareholders, against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Purchaser which results,
arises out of or is based upon: (i) any misrepresentation by Company
or breach of any warranty by Company in this Agreement or in any
exhibits or schedules attached hereto or any Related Agreement; or
(ii) any breach or default in performance by Company of any covenant
or undertaking to be performed by Company hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto.
8.2 Purchaser's Indemnification. Purchaser agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's
officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the Company which
results, arises out of or is based upon: (i) any misrepresentation by
Purchaser or breach of any warranty by Purchaser in this Agreement or
in any exhibits or schedules attached hereto or any Related Agreement;
or (ii) any breach or default in performance by Purchaser of any
covenant or undertaking to be performed by Purchaser hereunder, or any
other agreement entered into by the Company and Purchaser relating
hereto.
8.3 Procedures. The procedures and limitations set forth in Section
10.2(c) and (d) shall apply to the indemnifications set forth in
Sections 8.1 and 8.2 above.
9. Conversion of Convertible Note.
9.1 Mechanics of Conversion.
(a) Provided the Purchaser has notified the Company of the
Purchaser's intention to sell the Note Shares and the Note Shares
are included in an effective registration statement or are
otherwise exempt from registration when sold: (i) Upon the
conversion of the Note or part thereof, the Company shall, at its
own cost and expense, take all necessary action (including the
issuance of an opinion of counsel) to assure that the Company's
transfer agent shall issue shares of the Company's Common Stock
in the name of the Purchaser (or its nominee) or such other
persons as designated by the Purchaser in accordance with Section
9.1(b) hereof and in such denominations to be specified
representing the number of Note Shares issuable upon such
conversion; and (ii) The Company warrants that no instructions
other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that after the
Effectiveness Date (as defined in the Registration Rights
Agreement) the Note Shares issued will be freely transferable
subject to the prospectus delivery requirements of the Securities
Act and the provisions of this Agreement, and will not contain a
legend restricting the resale or transferability of the Note
Shares.
(b) Purchaser will give notice of its decision to exercise its right
to convert the Note or part thereof by telecopying or otherwise
delivering an executed and completed notice of the number of
shares to be converted to the Company (the "Notice of
Conversion"). The Purchaser will not be required to surrender the
Note until the Purchaser receives a credit to the account of the
Purchaser's prime broker through the DWAC system (as defined
below), representing the Note Shares or until the Note has been
fully satisfied. Each date on which a Notice of Conversion is
telecopied or delivered to the Company in accordance with the
provisions hereof shall be deemed a "Conversion Date." Pursuant
to the terms of the Notice of Conversion, the Borrower will use
its best efforts to issue instructions to the transfer agent
accompanied by an opinion of counsel within one (1) business day
of the date of the delivery to Borrower of the Notice of
Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by
crediting the account of the Purchaser's prime broker with the
Depository Trust Company ("DTC") through its Deposit Withdrawal
Agent Commission ("DWAC") system within three (3) business days
after receipt by the Company of the Notice of Conversion (the
"Delivery Date").
(c) The Company understands that a delay in the delivery of the Note
Shares in the form required pursuant to Section 9 hereof beyond
the Delivery Date could result in economic loss to the Purchaser.
In the event that the Company fails to direct its transfer agent
to deliver the Note Shares to the Purchaser via the DWAC system
within the time frame set forth in Section 9.1(b) above and the
Note Shares are not delivered to the Purchaser by the Delivery
Date, as compensation to the Purchaser for such loss, the Company
agrees to pay late payments to the Purchaser for late issuance of
the Note Shares in the form required pursuant to Section 9 hereof
upon conversion of the Note in the amount equal to the greater
of: (i) $250 per business day after the Delivery Date; or (ii)
the Purchaser's actual damages from such delayed delivery.
Notwithstanding the foregoing, the Company will not owe the
Purchaser any late payments if the delay in the delivery of the
Note Shares beyond the Delivery Date is solely out of the control
of the Company and the Company is actively trying to cure the
cause of the delay. The Company shall pay any payments incurred
under this Section in immediately available funds upon demand
and, in the case of actual damages, accompanied by reasonable
documentation of the amount of such damages. Such documentation
shall show the number of shares of Common Stock the Purchaser is
forced to purchase (in an open market transaction) which the
Purchaser anticipated receiving upon such conversion, and shall
be calculated as the amount by which (A) the Purchaser's total
purchase price (including customary brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (B) the
aggregate principal and/or interest amount of the Note, for which
such Conversion Notice was not timely honored.
Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event
that the rate of interest or dividends required to be paid or
other charges hereunder exceed the maximum amount permitted by
such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to a Purchaser and
thus refunded to the Company.
9.2 Maximum Conversion. The Purchaser shall not be entitled to
convert on a Conversion Date, that amount of a Note in connection
with that number of shares of Common Stock which would be (a) in
excess of the sum of: (i) the number of shares of Common Stock
beneficially owned by the Purchaser on a Conversion Date; and
(ii) the number of shares of Common Stock issuable upon the
conversion of the Note with respect to which the determination of
this proviso is being made on a Conversion Date, which would
result in beneficial ownership by the Purchaser of more than
4.99% of the outstanding shares of Common Stock of the Company on
such Conversion Date and (b) (ii) exceed twenty five percent
(25%) of the aggregate dollar trading volume of the Common Stock
for the ten (10) day trading period immediately preceding
delivery of a Notice of Conversion to the Borrower. For the
purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of
the Exchange Act and Regulation 13d-3 thereunder. Upon an Event
of Default under a Note, the conversion limitation in this
Section 9.2 shall become null and void.
10. Registration Rights, Indemnification.
10.1 Registration Rights Granted. The Company hereby grants
registration rights to the Purchaser pursuant to a Registration
Rights Agreement dated as of even date herewith between the
Company and the Purchaser.
10.2 Indemnification. (a) In the event of a registration of any
Registrable Securities under the Securities Act pursuant to the
Registration Rights Agreement, the Company will indemnify and
hold harmless the Purchaser, and its officers, directors and each
other person, if any, who controls the Purchaser within the
meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which the Purchaser,
or such persons may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act
pursuant to the Registration Rights Agreement, any preliminary
prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the
Purchaser, and each such person for any reasonable legal or other
expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any
such case if and to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by or on behalf of
the Purchaser or any such person in writing specifically for use
in any such document.
(b) In the event of a registration of the Registrable Securities
under the Securities Act pursuant to the Registration Rights
Agreement, the Purchaser will indemnify and hold harmless the
Company, and its officers, directors and each other person, if
any, who controls the Company within the meaning of the
Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such
persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such
Registrable Securities were registered under the Securities Act
pursuant to the Registration Rights Agreement, any preliminary
prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company
and each such person for any reasonable legal or other expenses
incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action, provided,
however, that the Purchaser will be liable in any such case if
and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made
in conformity with information furnished in writing to the
Company by or on behalf of the Purchaser specifically for use in
any such document.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10.2(c)
and shall only relieve it from any liability which it may have to
such indemnified party under this Section 10.2(c) if and to the
extent the indemnifying party is prejudiced by such omission. In
case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party
to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not
be liable to such indemnified party under this Section 10.2(c)
for any legal expenses subsequently incurred by such indemnified
party in connection with the defense thereof; if the indemnified
party retains its own counsel, then the indemnified party shall
pay all fees, costs and expenses of such counsel, provided,
however, that, if the defendants in any such action include both
the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may
be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed
to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select one separate
counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the Securities Act in any case in
which either: (i) the Purchaser, or any controlling person of the
Purchaser, makes a claim for indemnification pursuant to this
Section 10.2 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 10.2 provides for
indemnification in such case; or (ii) contribution under the
Securities Act may be required on the part of the Purchaser or
controlling person of the Purchaser in circumstances for which
indemnification is provided under this Section 10.2; then, and in
each such case, the Company and the Purchaser will contribute to
the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such
proportion so that the Purchaser is responsible only for the
portion represented by the percentage that the public offering
price of its securities offered by the registration statement
bears to the public offering price of all securities offered by
such registration statement, provided, however, that, in any such
case, (A) the Purchaser will not be required to contribute any
amount in excess of the public offering price of all such
securities offered by it pursuant to such registration statement;
and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10 of the Act)
will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
10.3 Offering Restrictions. Except as previously disclosed in the SEC
Reports or in the Exchange Act Filings, or stock or stock options
granted to employees or directors of the Company; or shares of
preferred stock issued to pay dividends in respect of the
Company's preferred stock; or equity or debt issued in connection
with an acquisition of a business or assets by the Company; or
the issuance by the Company of stock in connection with the
establishment of a joint venture partnership or licensing
arrangement (these exceptions hereinafter referred to as the
"Excepted Issuances"), the Company will not issue any securities
with a continuously variable/floating conversion feature which
are or could be (by conversion or registration) free-trading
securities (i.e. common stock subject to a registration
statement) prior to the full repayment or conversion of the Note
(the "Exclusion Period").
11. Miscellaneous.
11.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY
EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE
COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE
OF NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS
AGREEMENT AND OTHER AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO
SUBMIT TO THE JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY
JURY. IN THE EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY
OTHER AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID OR
UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN
SUCH PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT
MAY CONFLICT THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM
WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH MAY
PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE
VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF ANY
AGREEMENT.
11.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by
the Purchaser and the closing of the transactions contemplated
hereby to the extent provided therein. All statements as to
factual matters contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or
instrument.
11.3 Successors. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding
upon, the successors, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of the
Securities from time to time, other than the holders of Common
Stock which has been sold by the Purchaser pursuant to Rule 144
or an effective registration statement. Purchaser may not assign
its rights hereunder to a competitor of the Company.
11.4 Entire Agreement. This Agreement, the exhibits and schedules
hereto, the Related Agreements and the other documents delivered
pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof
and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
11.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
11.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only with the
written consent of the Purchaser.
(c) The obligations of the Purchaser and the rights of the
Company under this Agreement may be waived only with the
written consent of the Company.
11.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon
any breach, default or noncompliance by another party under this
Agreement or the Related Agreements, shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement,
the Note or the Related Agreements, by law or otherwise afforded
to any party, shall be cumulative and not alternative.
11.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) only as to conversion notices, when sent by confirmed
facsimile if sent during normal business hours of the
recipient, if not, then on the next business day, with the
original of such notice to be sent through a reputable
national overnight courier to arrive the next day;
(c) three (3) business days after having been sent by registered
or certified mail, return receipt requested, postage
prepaid; or
(d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with
written verification of receipt.
All communications shall be sent as follows:
If to the Company, to:
PIPELINE DATA INC.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser, to:
Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services ltd.
▇.▇. ▇▇▇ ▇▇▇▇ G.T.
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as the Company or the Purchaser may
designate by written notice to the other parties hereto given in
accordance herewith.
11.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the
prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing
any right of such prevailing party under or with respect to this
Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
11.10Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
11.11Facsimile Signatures; Counterparts. This Agreement may be
executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
11.12Broker's Fees. Except as set forth on Schedule 11.12 hereof,
Each party hereto represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any
broker's or finder's fee or any other commission directly or
indirectly in connection with the transactions contemplated
herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other
party as a result of the representation in this Section 11.12
being untrue.
11.13Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this
Agreement to favor any party against the other.
[the remainder of this page is intentionally left blank
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
PIPELINE DATA INC. LAURUS MASTER FUND, LTD.
By: By:
----------------------- -------------------------
----------------------- -------------------------
Name: Name:
---------------------- -------------------------
---------------------- -------------------------
Title: Title:
---------------------- -------------------------
A-1
EXHIBIT A
FORM OF CONVERTIBLE NOTE
B-1
EXHIBIT B
FORM OF WARRANT
C-1
EXHIBIT C
FORM OF OPINION
1........The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted.
2........The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Agreement and Related
Agreements. All corporate action on the part of the Company and its officers,
directors and stockholders necessary has been taken for: (i) the authorization
of the Agreement and Related Agreements and the performance of all obligations
of the Company thereunder at the Closing; and (ii) the authorization, sale,
issuance and delivery of the Securities pursuant to the Agreement and the
Related Agreements. The Note Shares and the Warrant Shares, when issued pursuant
to and in accordance with the terms of the Agreement and the Related Documents
and upon delivery shall be validly issued and outstanding, fully paid and non
assessable.
3........The execution, delivery and performance of the Agreement, the Note
or the Related Agreements by the Company and the consummation of the
transactions on its part contemplated by any thereof, will not, with or without
the giving of notice or the passage of time or both:
(a) Violate the provisions of the Charter or bylaws of the Company;
or
(b) To the best of such counsel's knowledge, violate any judgment,
decree, order or award of any court binding upon the Company.
4........The Agreement and Related Agreements will constitute, valid and
legally binding obligations of the Company, and are enforceable against the
Company in accordance with their respective terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting
enforcement of creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
5........To such counsel's knowledge, the sale of the Note and the
subsequent conversion of the Note into Note Shares are not subject to any
preemptive rights or rights of first refusal that have not been properly waived
or complied with. To such counsel's knowledge, the sale of the Warrant and the
subsequent exercise of the Warrant for Warrant Shares are not subject to any
preemptive rights or, to such counsel's knowledge, rights of first refusal that
have not been properly waived or complied with.
6........Assuming the accuracy of the representations and warranties of the
Purchaser contained in the Agreement, the offer, sale and issuance of the
Securities on the Closing Date will be exempt from the registration requirements
of the Securities Act. To such counsel's knowledge, neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy and security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Rule 506 under the Securities Act, or
any applicable exchange-related stockholder approval provisions.
7........There is no action, suit, proceeding or investigation pending or,
to such counsel's knowledge, currently threatened against the Company that
prevents the right of the Company to enter into this Agreement or any of the
Related Agreements, or to consummate the transactions contemplated thereby. To
such counsel's knowledge, the Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality; nor is there any action, suit, proceeding
or investigation by the Company currently pending or which the Company intends
to initiate.
8........The UCC-1 Financing Statement naming the Company as debtor and
Laurus as secured party is in proper form for filing and assuming that such
UCC-1 Financing Statement has been filed with the Secretary of State of
Delaware, the security interest created under the Security Agreement will
constitute a perfected security interest under the Uniform Commercial Code in
favor of Laurus.
D-3
exhibit d
FORM OF ESCROW AGREEMENT
Schedule 4.3
outstanding options, warrants and rights
1. 3,000,000 shares of Common Stock issuable to ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ upon
conversion of shares of Preferred Stock issued to them in connection with
the acquisition of Northern Merchants, Inc.
2. 100,000 shares of Common Stock issuable to ▇▇▇▇▇ ▇▇▇▇▇▇ upon execution of
this agreement.
3. 14,286 shares of Common Stock per month issuable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in lieu
of $5,000 monthly cash compensation.
4. Common Shares issuable pursuant to Convertible Notes as set forth in
Securities Act filings, some of the holders of which have made the
investment decision to convert at the beginning of this year. These
convertible notes are convertible into unregistered shares of the Company.
5. Up to 5,500,000 Common Shares issuable to members of SecurePay in the event
certain milestones are met and as disclosed on Schedule 7(b) to the
Registration Rights Agreement that forms a part of these deal documents.
6. Up to 3,000,000 Common Shares issuable to members of NMS in the event
certain milestones are met and as disclosed on Schedule 7(b) to the
Registration Rights Agreement that forms a part of these deal documents.
7. Up to 280,000 options issuable to ▇▇▇▇ ▇▇▇▇▇▇ as Investor Relations
Coordinator.
8. Rights to Cash and Stock by GunAllen Financial, Inc. as set forth in
Schedule 11.12 hereto.
9. Class A Warrants to purchase 785,210 shares of Common Stock.
10. Class B Warrants to purchase 971,233 shares of Common Stock.
Schedule 4.13
There is an outstanding tax liability of approximately $30,000 due to the
Internal Revenue Service from ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, the liability for which
Pipeline Data acquired pursuant to the acquisition of NMS.
Schedule 4.14
EMployees
Each of SecurePay and NMS have entered into have standard independent
contractor contracts affording us rights regarding competition and accrual
payments that they may convert into employment contracts as these people have
more of the indicia of employees than of independent contractors.
SCHEDULE 4.15
Piggyback rights on Registrations
The following persons have been awarded piggyback registration rights:
Name Description
▇▇▇▇▇ ▇▇▇▇▇▇ 600,000 common shares
Together with ▇▇▇▇▇ ▇▇▇▇▇▇, that number of common shares
into which an aggregate of 3,000 shares of preferred shares
are convertible (3,000,000 common shares).
Up to 3,000,000 common shares (if issued pursuant to
milestones)
▇▇▇▇▇ ▇▇▇▇▇▇ 500,000 common shares
▇▇▇▇ ▇▇▇▇▇ 100,000 common shares
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 749,496 common shares
100,000 common shares
2,987,512 common shares (if issued pursuant to milestones)
Chasm Holdings 4,118,545 common shares
1,100,000 common shares (if issued pursuant to milestones)
▇.▇▇▇▇▇▇▇ Reynolds1,100,000 common shares
1,000,000 common shares (if issued pursuant to milestones)
▇▇▇▇ ▇▇▇▇▇▇ up to 280,000 shares
(if issued as investor relations representative)
▇▇▇▇ ▇▇▇▇▇▇▇ 201,256 common shares (if issued pursuant to milestones)
▇▇▇ ▇▇▇▇▇▇▇▇ 46,233 common shares
201,256 common shares (if issued pursuant to milestones)
▇▇▇▇ ▇▇▇▇▇▇▇ 184,200 common shares
▇▇▇▇▇ ▇▇▇▇▇ 247,750 common shares
988,504 common shares (if issued pursuant to milestones)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 2,694 common shares
10,736 common shares (if issued pursuant to milestones)
▇▇▇▇▇ ▇▇▇▇▇▇ 2,694 common shares
10,736 common shares (if issued pursuant to milestones)
▇▇▇▇▇ ▇▇▇▇▇▇ 2,155 common shares
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 100,000 common shares
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 160,000 common shares
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 150,000 common shares
Note: GunAllen Financial, Inc. piggyback registration rights as set forth in
Schedule 11.12 hereto.
Schedule 6.12(e)
DEBT INCURRENCE AND FORGIVENESS
Convertible Notes as set forth in Securities Act filings.
Schedule 11.12
BROKERS' FEES
The following finder's fee is due and payable to GunnAllen Financial, Inc.:
3% Cash 2% Stock on first million dollars raised,
2% Cash 2% Stock on second million dollars raised,
1. 5% Cash 1.5% Stock on third million dollars raised,
1% Cash 1% Stock on fourth million dollars raised, and
1% Cash thereafter.
Note: Stock is subject to piggyback registration rights.