SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated as of December 17, 2001, between DirectPlacement, Inc.
(the "Company") and Global Capital Funding Group, L.P. ("Purchaser").
R E C I T A L S:
WHEREAS, the Company desires to sell and issue to Purchaser, and
Purchaser desires to purchase from the Company $1,250,000 principal amount of
the Company's 10% Convertible Debentures due December 17, 2003 (the "Convertible
Debentures") in accordance with the terms and conditions as set forth in the
form of Convertible Debenture attached hereto as Exhibit A;
WHEREAS, the Convertible Debentures will be convertible into shares of
the Company's common stock, $0.0001 par value per share (the "Common Stock");
WHEREAS, in order to induce the Purchaser to enter into the
transactions described in this Agreement, the Company desires to issue to the
Purchaser an aggregate of 125,000 warrants to purchase shares of Common Stock
upon the Closing (as defined herein) on the terms and conditions described in
the form of the common stock purchase warrant attached hereto as Exhibit E (the
WHEREAS, Purchaser will have certain registration rights with respect
to such shares of Common Stock issuable as interest under, and upon conversion
of, the Convertible Debentures (the "Debenture Shares") and upon exercise of the
Warrants (the "Warrant Shares," the Debenture Shares and the Warrant Shares
being collectively referred to herein as the "Conversion Shares") as set forth
in the Registration Rights Agreement in the form attached hereto as Exhibit B;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1. DEFINITIONS
ARTICLE 1.1 Definitions. The following terms, as used herein, have the
"Additional Shares of Common Stock" has the meaning set forth in
"Affiliate" means, with respect to any Person (the "Subject Person"),
(i) any other Person (a "Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject Person or (ii) any
other Person (other than the Subject Person or a Consolidated Subsidiary of the
Subject Person) which is Controlled by or is under common Control with a
"Agreement" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
"Asset Sale" has the meaning set forth in Section 8.4.
"Balance Sheet Date" has the meaning set forth in Section 4.7.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by the Company.
"Benefit Plans" has the meaning set forth in Section 4.9(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
"Capital Reorganization" has the meaning set forth in Section 11.5.
"Change in Control" means (i) after the date of this Agreement, any
person or group of persons (within the meaning of Sections 13 and 14 of the
Exchange Act and the rules and regulations of the Commission relating to such
sections) other than Purchaser shall have acquired beneficial ownership (within
the meaning of Rules 13d-3 and 13d-5 promulgated by the Commission pursuant to
the Exchange Act) of 33"% or more of the outstanding shares of Common Stock of
the Company without the prior written consent of Purchaser; (ii) any sale or
other disposition (other than by reason of death or disability) to any Person of
more than 75,000 shares of Common Stock of the Company by any executive officers
and/or employee directors of the Company without the prior written consent of
Purchaser; (iii) individuals constituting the Board of Directors of the Company
on the date hereof (together with any new Directors whose election by such Board
of Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of at least 50.1% of the Directors still in office who
are either Directors as of the date hereof or whose election or nomination for
election was previously so approved), cease for any reason to constitute at
least two-thirds of the Board of Directors of the Company then in office.
"Closing Bid Price" shall mean for any security as of any date, the
lowest closing bid price as reported by Bloomberg, L.P. ("Bloomberg") on the
principal securities exchange or trading market where such security is listed or
traded or, if the foregoing does not apply, the lowest closing bid price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no lowest trading price is
reported for such security by Bloomberg, then the average of the bid prices of
any market makers for such securities as reported in the "Pink Sheets" by the
National Quotation Bureau, Inc. If the lowest closing bid price cannot be
calculated for such security on such date on any of the foregoing bases, the
lowest closing bid price of such security on such date shall be the fair market
value as mutually determined by Purchaser and the Company for which the
calculation of the closing bid price requires, and in the absence of such mutual
determination, as determined by the Board of Directors of the Company in good
"Closing Date" means the date on which all of the conditions set forth
in Sections 6.1 and 6.2 shall have been satisfied and Convertible Debentures in
the aggregate principal amount of $1,250,000 are issued by the Company to
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any entity
succeeding to all of its material functions.
"Common Stock" means common stock, $0.0001 par value per share, of the
"Company" means DirectPlacement, Inc., a Delaware corporation, and its
"Company Corporate Documents" means the certificate of incorporation
and bylaws of the Company.
"Consolidated Net Worth" means at any date the total shareholder's
equity which would appear on a consolidated balance sheet of the Company
prepared as of such date.
"Consolidated Subsidiary" means at any date with respect to any Person
or Subsidiary or other entity, the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such statements
were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
"Conversion Date" shall mean the date of delivery (including delivery
via telecopy) of a Notice of Conversion for all or a portion of a Convertible
Debenture by the holder thereof to the Company as specified in each Convertible
"Conversion Price" has the meaning set forth in the Convertible
"Conversion Shares" has the meaning set forth in the Recitals.
"Convertible Debentures" means the Company's 10% Convertible Debentures
substantially in the form set forth as Exhibit A hereto.
"Deadline" has the meaning set forth in Section 10.1.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such Person.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivative Securities" has the meaning set forth in Section 8.6.
"Discounted Equity Offerings" has the meaning set forth in Section 8.6.
"Directors" means the individuals then serving on the Board of
Directors or similar such management council of the Company.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the cleanup or other
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company and each Subsidiary and all members of
a controlled group of corporation and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under the Code.
"Event of Default" has the meaning set forth in Article XII hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financing" means a public or private financing consummated (meaning
closing and funding) through the issuance of debt or equity securities (or
securities convertible into or exchangeable for debt or equity securities) of
the Company, other than Permitted Financings.
"Fixed Price(s)" has the meaning set forth in Section 11.1.
"GAAP" has the meaning set forth in Section 1.2.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by virtue
of partnership arrangements, by agreement to keep well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain a minimum net
worth, financial ratio or similar requirements, or otherwise) any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or (ii) entered into for the purpose of assuring in any other manner the
holder of such Debt of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part); provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term Guarantee used as a verb has a corresponding meaning.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances or petroleum products
(including crude oil or any derivative or fraction thereof), defined or
regulated as such in or under any Environmental Laws.
"Intellectual Property" has the meaning set forth in Section 4.20.
"Investment" means any investment in any Person, whether by means of
share purchase, partnership interest, capital contribution, loan, time deposit
"Lien" means any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge, restriction, security
interest or other adverse claim, whether arising by contract or under law or
otherwise (including, without limitation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
"Listing Applications" has the meaning set forth in Section 4.4.
"Majority Holders" means (i) as of the Closing Date, Purchaser and (ii)
at any time thereafter, the holders of more than 50% in aggregate principal
amount of the 10% Convertible Debentures dated December 17, 2001 outstanding at
"Market Price" shall mean the Closing Bid Price of the Common Stock
preceding the date of determination.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $500,000.
"Maturity Date" shall mean the date of maturity of the Convertible
"Maximum Number of Shares" shall mean that percentage that the Company
may issue without shareholder approval under the applicable rules of the
National Market or the applicable OTC Bulletin Board or equivalent entity, of
the then issued and outstanding shares of Common Stock of the Company as of the
applicable date of determination, or such greater number of shares as the
stockholders of the Company may have previously approved.
"NASD" has the meaning set forth in Section 7.10.
"Nasdaq Market" means the Nasdaq Stock Market's National Market System.
"National Market" means the Nasdaq Market, the Nasdaq Small Cap Market,
the New York Stock Exchange, Inc. or the American Stock Exchange, Inc.
"Net Cash Proceeds" means, with respect to any transaction, the total
amount of cash proceeds received by the Company or any Subsidiary less (i)
reasonable underwriters' fees, brokerage commissions, reasonable professional
fees and other customary out-of-pocket expenses payable in connection with such
transaction, and (ii) in the case of dispositions of assets, (A) actual transfer
taxes (but not income taxes) payable with respect to such dispositions, and (B)
the amount of Debt, if any, secured by a Lien on the asset or assets disposed of
and required to be, and actually repaid by the Company or any Subsidiary in
connection therewith, and any trade payables specifically relating to such asset
or assets sold by the Company or any Subsidiary that are not assumed by the
purchaser of such asset or assets.
"Notice of Conversion" means the form to be delivered by a holder of a
Convertible Debenture upon conversion of all or a portion thereof to the Company
substantially in the form of Exhibit A to the form of Convertible Debenture.
"Notice of Exercise" means the form to be delivered by a holder of a
Warrant upon exercise of all or a portion thereof to the Company substantially
in the form of Exhibit A to the Warrant.
"Officer's Certificate" shall mean a certificate executed by the
president, chief executive officer or chief financial officer of the Company in
the form of Exhibit D attached hereto.
"OTC Bulletin Board" means the over-the-counter bulletin board operated
by the NASD.
"Other Taxes" has the meaning set forth in Section 3.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions, consents,
certificates, orders and approvals necessary to own, lease and operate the
properties of, and to carry on the business of the Company and the Subsidiaries.
"Permitted Financings" has the meaning set forth in Section 8.6.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock Company,
government (or any agency or political subdivision thereof) or other entity of
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
the Code and either (i) is maintained, or contributed to, by any member of the
ERISA group for employees of any member of the ERISA group or (ii) has at any
time within the preceding five years been maintained, or contributed to, by any
Person which was at such time a member of the ERISA group for employees of the
Person which was at such time a member of the ERISA Group.
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.2 hereof.
"Purchaser" means the entity listed on the signature page hereto and
its successors and assigns, including holders from time to time of the
"Recourse Financing" means Debt of the Company or any Subsidiary which,
by its terms, does not bar the lender thereof from action against the Company or
any Subsidiary, as borrower or guarantor, if the security value of the project
or asset pledged in respect thereof falls below the amount required to repay
"Redemption Event" has the meaning set forth in Section 3.4.
"Registrable Securities" has the meaning set forth in Section 10.4(a).
"Registration Default" has the meaning set forth in Section 10.4(e).
"Registration Maintenance Period" has the meaning set forth in Section
"Registration Statement" has the meaning set forth in Section 10.4(b).
"Registration Rights Agreement" means the agreement between the Company
and Purchaser dated the date hereof substantially in the form set forth in
Exhibit B attached hereto.
"Required Effectiveness Date" has the meaning set forth in Section
"Reserved Amount" has the meaning set forth in Section 7.10(a).
"Restricted Payment" means, with respect to any Person, (i) any
dividend or other distribution on any shares of capital stock of such Person
(except dividends payable solely in shares of capital stock of the same or
junior class of such Person and dividends from a wholly-owned direct or indirect
Subsidiary of the Company to its parent corporation), (ii) any payment on
account of the purchase, redemption, retirement or acquisition of (a) any shares
of such Person's capital stock or (b) any option, warrant or other right to
acquire shares of such Person's capital stock or (iii) any loan, or advance or
capital contribution to any Person (a "Stockholder") owning any capital stock of
such Person other than relocation, travel or like advances to officers and
employees in the ordinary course of business, and other than reasonable
compensation as determined by the Board of Directors.
"Rights Offering" has the meaning set forth in Section 11.3.
"Sale Event" has the meaning set forth in Section 3.4.
"SEC Reports" has the meaning set forth in Section 7.1(a).
"Securities" means the Convertible Debentures, the Warrants and, as
applicable, the Conversion Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" has the meaning set forth in the recitals.
"Share Reorganization" has the meaning set forth in Section 11.2.
"Solvency Certificate" shall mean a certificate executed by the chief
financial officer or treasurer of the Company as to the solvency of the Company,
the adequacy of its capital and its ability to pay its debts, all after giving
effect to the issuance and sale of the Convertible Debentures and the completion
of the offering (including without limitation the payment of any fees or
expenses in connection therewith), which such Solvency Certificate shall be in
the form of Exhibit C attached hereto.
"Special Distribution" has the meaning set forth in Section 11.4.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which (x) a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person or (y) the results of operations, the assets
and the liabilities of which are consolidated with such Person under GAAP.
"Subsidiary Corporate Documents" means the certificates of
incorporation and bylaws of each Subsidiary.
"Taxes" has the meaning set forth in Section 3.6.
"Trading Day" shall mean any Business Day in which the OTC Bulletin
Board, National Market or other automated quotation system or exchange on which
the Common Stock is then traded is open for trading for at least four (4) hours.
"Transaction Agreements" means this Agreement, the Convertible
Debenture, the Warrants, the Registration Rights Agreement and the other
agreements contemplated by this Agreement.
"Transaction Fee" has the meaning set forth in Section 13.4.
"Transfer" means any disposition of Securities that would constitute a
sale thereof under the Securities Act.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Warrant" means the Common Stock Purchase Warrant substantially in the
form set forth in Exhibit E hereto.
ARTICLE 1.2 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a consistent basis (except for changes concurred in by the Company's
independent public accountants) ("GAAP"). All references to "dollars," "Dollars"
or "$" are to United States dollars unless otherwise indicated.