Exhibit 10.6
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 21st day of January, 2000 by and between Real Time Strategies, Inc. d/b/a
RTS Wireless, a New York corporation (the "Company"), and Monsoon Ventures LLC,
a New York limited liability company (the "Purchaser").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
1. The Note.
1.1 The Purchaser hereby agrees to lend to the Company $3,500,000, on the
terms and conditions hereof (the "Loan"). The Loan shall be evidenced by a
convertible promissory note in substantially the form attached hereto as Exhibit
A (the "Note"), and shall be subject to, and convertible into equity securities
of the Company upon, the terms and conditions contained therein. The Note shall
bear interest at a rate equal to eight percent per annum, compounded annually.
All shares issuable or issued upon any conversion of the Note (or upon any
conversion of any additional convertible promissory notes of the Company
purchased by the Purchaser) shall be referred to herein as "Shares".
2. Closing Dates; Delivery.
2.1 Closing Date. The consummation of the Loan and the initial issuance of
the Note pursuant to this Agreement, shall take place at the offices of Xxxxxx
Xxxxxx Xxxxxxx XxXxxxxx Xxxxxx & Fognani LLP, 1330 Avenue of the Americas, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx at 1:00 p.m., Eastern Standard Time, on January 21,
2000, or on such other date as may be mutually agreed to by the Company and the
Purchaser, such time and date being referred to herein as the "Closing". At the
Closing, the Purchaser shall lend, and the Company shall accept, $3,500,000 on
the terms set forth herein and in the Note.
2.2 Delivery. At the Closing (a) the Company will execute and deliver to
the Purchaser the Note, which shall be issued in the Purchaser's name and dated
the Closing Date and (b) the Purchaser shall deliver to the Company the Loan
amount in the form of cash, certified check or wire transfer, as may be required
by the Company.
3. Additional Loans, Additional Investment and Equity Call. Without limiting
their respective rights and obligations set forth in and/or with respect to the
Note, the parties hereby agree that they shall have the respective rights and
obligations set forth below:
3.1 Calls in Exchange for Additional Convertible Notes. From time to time
after the date hereof but prior to the earlier of January 24, 2001 or the
effective date of any Public Offering (as defined in the Note), the Company, at
its option, may require the Purchaser to loan additional sums to the Company up
to an aggregate amount of $1,500,000. Within twenty (20) business days after its
receipt of a written request for such an additional loan by the Company, the
Purchaser shall advance such loan to the Company upon the Company's execution
and delivery to the Purchaser of an additional convertible promissory note
representing such loan.
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Each such additional convertible promissory note shall be substantially similar
in form to the Note, but will show the amount of the applicable additional loan
and the date thereof. The Purchaser may, at its option exercised by written
notice to the Company, designate an alternate entity or person(s) to advance one
or more of such loan(s) (or a portion thereof) to the Company in accordance with
the terms of this Section 3.1 (including the time limitation set forth herein);
provided, however, that no such designation shall be effective until the Company
receives from its counsel, within ten (10) days after request therefor, an
opinion or other advice to the effect that such designation and the additional
loans comply with all applicable federal and state securities laws and
regulations, which opinion or other advice shall be reasonably acceptable in
form and substance to the Company.
4. Shareholders Agreement.
4.1 Upon execution and delivery of the Note, the Purchaser agrees to (i)
execute a Shareholders Agreement in the form attached hereto as Exhibit B (the
"Shareholders Agreement") and deliver the same to the Company, and (ii)
hereafter, as a condition to the issuance of any Shares, cause each member of
the Purchaser to whom the Purchaser may transfer the Note (or any portion
thereof) or any Shares, as permitted in the Shareholders Agreement, to execute a
counterpart of the Shareholders Agreement and deliver the same to the Company.
5. Representations, Warranties and Covenants of the Company. The Company hereby
represents, warrants and covenants to and with the Purchaser as follows:
5.1 Corporate Power and Authority. The Company has all requisite corporate
power to enter into this Agreement, to carry out the terms hereof, and to issue
to the Purchaser the Note and the Shares upon any conversion of the Note. All
corporate action on the part of the Company, its officers, directors and
shareholders necessary for the performance of the obligations of the Company
under this Agreement and the Note, and for the authorization, issuance and
delivery of the Note, has been taken prior to the Closing. This Agreement and
the Note have been duly executed and delivered by the Company and upon execution
and delivery by the Company this Agreement and the Note will be valid and
legally enforceable in accordance with their terms.
5.2 Authorization of Shares. After the Closing, the Company shall take all
necessary steps to ensure that sufficient shares of its common stock are
available for issuance as Shares in accordance with this Agreement and the Note.
5.3 Financial Statement. The Company has delivered to the Purchaser its
business plan. The financial statements set forth therein fairly present the
consolidated financial condition of the Company as of the date of each balance
sheet and the statement of operations contained therein accurately represents in
all material respects the operating results of the Company during the period
indicated therein.
6. Representation, Warranties and Covenants of the Purchaser. The Purchaser
hereby represents and warrants to, and covenants with, the Company as follows:
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6.1 Corporate Power and Authority. The Purchaser has all requisite power
to enter into this Agreement, to carry out the terms hereof, to accept the Note,
to accept the Shares upon any conversion of the Note and to make the Loan. All
action on the part the Purchaser and its members necessary to authorize the
performance of the obligations of the Purchaser and its members under this
Agreement and the Note has been taken prior to the Closing. This Agreement has
been duly executed and delivered by the Purchaser and upon execution and
delivery by the Purchaser this Agreement will be valid and legally enforceable
in accordance with its terms.
6.2 Investment Representations. The Purchaser understands that the Note
and the Shares have not been registered under the Securities Act of 1933, as
amended (the "Act"), and that they are being offered and sold pursuant to an
exemption from registration contained in the Act based in part upon the
representations of the Purchaser contained herein. The Purchaser hereby
represent, warrants to, and agrees with the Company that the Purchaser is
acquiring the Note and the Shares for its own account for investment and not
with a view to, or for sale in connection with, any distribution thereof in
violation of the Act. By executing this Agreement, the Purchaser further
represents and warrants that the Purchaser has no contract, undertaking,
agreement or arrangement with any person to sell, transfer, or grant
participation to such person or to any third person, with respect to the Note or
Shares.
6.3 Experience. The Purchaser is experienced in evaluating private
companies such as the Company, and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of the Purchaser's investment in the Note (and any additional convertible
promissory notes of the Company purchased by the Purchaser) and the Shares, and
has the ability to bear the economic risks of its investment for an indefinite
period of time, and, at the present time, is able to afford a complete loss of
such investment.
6.4 Rule 144. The Purchaser acknowledges that the Note and the Shares must
be held indefinitely unless subsequently registered under the Act or an
exemption from such registration is available. The Purchaser is aware of the
provisions of Rule 144 promulgated under the Act which permit limited resale of
shares purchased in a private placement subject to the satisfaction of certain
conditions. The Purchaser covenants that, in the absence an effective
registration statement covering the Note and the stock in question, except as
permitted in the Note, the Purchaser will sell, transfer, or otherwise dispose
of the Note and Shares only in a manner consistent with the Purchaser's
representations and covenants set forth in this Section 6.4.
6.5 No Public Market. The Purchaser understands that no public market now
exists for any of the securities issued by the Company, nor is any public market
for the Note and the Shares contemplated at present, and it is unlikely that a
public market will ever exist for the Note or the Shares.
6.6 Access to Data. The Purchaser has received and reviewed information
about the Company and has had an opportunity to discuss the Company's business,
management and financial affairs with its management and to review the Company's
facilities. The Purchaser understands that such discussions, as well as any
written information issued by the Company,
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were intended to describe the aspects of the Company's business and prospects
which the Company believes to be material, but were not necessarily an
exhaustive description.
6.7 Accredited Investors. The Purchaser, and each member of the Purchaser,
is an "accredited investor" as defined in Regulation D under the Act. The
Purchaser agrees that, in addition to the foregoing representation and warranty
relating to the "accredited investor" status of each of the Purchaser and its
members, the Company may rely on the representations and warranties of each
member of the Purchaser set forth in Article XI of the Monsoon Ventures, LLC
Operating Agreement, a copy of which has been provided to the Company. The
Purchaser represents that such furnished copy is complete and accurate in all
respects relevant to each such member's status as an "accredited investor".
6.8 Preservation of Subchapter S Status. Each member of the Purchaser to
whom the Purchaser transfers any Shares is and shall at all times be an
individual (i.e., natural person) resident in the United States, or shall comply
with such other applicable requirements, such that upon such transfer and at all
times thereafter the Company shall not suffer the loss of its status as a
Subchapter S corporation under the Internal Revenue Code. As a condition to the
transfer of any such Shares, the Purchaser shall furnish such evidence as the
Company may reasonably require to show that such transfer will not cause the
loss of such Subchapter S status.
7. Lock-Up and Regulatory Compliance Requirements.
(a) Underwriters Lock-Up. The Purchaser agrees that, if so requested by
the Company and any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Act, the Purchaser shall not publicly sell
or otherwise publicly transfer any Shares during the 180-day period (or such
other lesser period as may be requested in writing by the Managing Underwriter)
(the "Market Standoff Period") following the effective date of a registration
statement of the Company filed under the Act. Such restriction shall apply only
to the first registration statement of the Company to become effective under the
Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Act. The Company may impose
stop-transfer instructions with respect to Shares subject to the foregoing
restrictions until the end of such Market Standoff Period. Notwithstanding the
foregoing, in the event the Managing Underwriter requires or agrees that the
Purchaser shall be released from any such restriction on sale or transfer, such
release shall be implemented in accordance with such requirement or agreement
and the Company shall remove any related stop-transfer instructions.
(b) Regulatory Requirements. The Purchaser agrees to (a) comply with any
lock-up and/or other requirements or restrictions of any kind imposed or
requested by the Securities and Exchange Commission (the "SEC") and/or NASDAQ or
any other market or exchange on which the Securities are to be listed or traded
(each, an "Exchange") in connection with any registration of the public offering
of any securities of the Company under the Act ("Regulatory Requirements"), and
(b) execute and deliver to the Company, and to the SEC and any relevant Exchange
(as the case may be), all agreements, documents and instruments necessary to
evidence such agreement to so comply ("Regulatory Compliance Documents"). The
Purchaser hereby authorizes the Company, and does hereby make, constitute and
appoint the Company and
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any officer, employee or agent of the Company with full power of substitution,
as the Purchaser's true and lawful attorney-in-fact with power, in its own name
or in the name of the Purchaser, to execute and deliver any such Regulatory
Compliance Documents as fully and effectually as the Purchaser might or could
do, and the Purchaser hereby ratifies all that such attorney-in-fact shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable for as long as any Shares
shall be registered in the name of the Purchaser or any member or transferee of
the Purchaser. The Company may impose such stop-transfer instructions with
respect to Shares and other securities as may be necessary or advisable in order
to ensure compliance with Regulatory Requirements.
8. Registration Rights. The Company agrees to grant to the Purchaser with
respect to the Shares substantially the same registration rights as it may grant
with respect to any "Securities" (as defined in the Note) of the Company that
are purchased by any person or entity in a "Financing" (as such term is defined
in the Note) in which the outstanding principal amount of the Note (and the
outstanding principal amount(s) of any additional convertible promissory note(s)
of the Company purchased by the Purchaser) are converted into Securities.
9. Legends. The Note and certificates representing any Shares will each be
stamped or otherwise imprinted with legends as set forth in the form of Note
attached hereto as Exhibit A. Such legends shall be removed by the Company from
the Note, or any certificates representing the Shares, upon delivery to it of an
opinion of counsel that a registration statement under the Act is, at the time,
in effect with respect to the legended security or that such security can be
freely transferred without such registration statement being in effect and that
such transfer will not jeopardize the exemption or exemptions from registration
pursuant to which the Note was issued.
10. Modification and Waiver. No modification or waiver of any provision of this
Agreement or consent to departure therefrom shall be effective unless in writing
and signed by the Company and the Purchaser.
11. Notices. Any notice or report herein required or permitted to be given shall
be given by depositing the same in the United States mail, postage prepaid,
return receipt requested and addressed to the parties as follows:
(a) To the Company:
Real Time Strategies, Inc. d/b/a RTS Wireless
00 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
Attention: President
(b) To the Purchaser:
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c/o Xxxxx X Xxxxxxx
Xxxxxx Xxxxxx Xxxxxxx XxXxxxxx Xxxxxx & Fognani
1330 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
copy to:
Xxxxx X. Xxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
or to such other place or places as either of the parties shall designate by
written notice to the other.
12. Assignment; Successors and Assigns. Neither Party may assign this Agreement,
in whole or in part, without the other party's prior written consent. Any
assignment in violation of this paragraph shall be void. Subject to the
forgoing, all covenants and agreements of the parties contained in this
Agreement shall be binding and inure to the benefit of their respective
successors and assigns.
13. Governing Law. This Agreement shall in all respects be governed by the laws
of State of New York, without reference to the conflicts or choice of law
principles thereof.
14. Section Headings. The section and paragraph headings contained herein are
for reference purposes only and shall not in any way affect the meaning and
interpretation of this Agreement.
15. Execution in Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute a single instrument.
16. Expenses of Agreement. The parties to this Agreement shall each bear their
own expenses incurred in connection with the preparation, execution and delivery
of this Agreement, the Note and any other instruments and documents related
thereto, and shall be solely responsible for payments to their respective
counsel and accountants for all matters related to this transaction.
17. Survival. The representations, warranties, covenants and agreements made
herein shall survive the closing of the transactions contemplated herein.
18. Entire Agreement. This Agreement and Exhibits A and B hereto constitute the
full and entire understanding and agreement between the parties with regard to
the subject matter hereof and thereof.
19. Severability. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall
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continue in full force and effect without such provision; provided that no such
severability shall be effective if it materially changes the economic benefit of
this Agreement to any party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective representatives thereunto duly authorized the day and year
first above written.
REAL TIME STRATEGIES, INC. d/b/a RTS Wireless,
a New York corporation
By: /s/ Xxxxxxx Xxxxxxx
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Name: Xxxxxxx Xxxxxxx
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Title: Executive VP and COO
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MONSOON VENTURES LLC,
a New York limited liability company
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Title: Managing Member
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